The U.S. Securities and Exchange Commission (SEC) awarded $279 million to a whistleblower who provided information to the regulator and other agencies to bring enforcement actions. The award was the largest payout ever recorded, breaking the previous record of $114 million.
Under SEC rules, whistleblowers who provide original information that leads to an enforcement action may receive a reward of between 10 and 30 percent of fines collected in SEC actions whenever the agency collects more than $1 million.
Though the SEC has kept the name of the whistleblower and the business under investigation secret, the agency stated that a probe of the company had already been opened. Through the whistleblower’s information however, the agency was able to expand its probe and obtain cooperation with other governmental agencies which were affected by the apparent fraud.
Because of interagency cooperation, the whistleblower award was increased due to fines levied by other departments, leading to the record award of $279 million.
SEC Whistleblower Program Incentivizes Reporting
The SEC whistleblower program was established by Congress in 2010 as part of the Dodd-Frank Act, to provide financial incentives for individuals to come forward with information about possible violations of the federal securities laws. The program prohibits retaliatory actions against employees by employers who provide information in a whistleblower report.
Whistleblowers do not have to be employees of a company being reported but companies and organizations cannot be whistleblowers. Whistleblowers may submit tips on their own, however in order to qualify for the whistleblower program anonymously, a whistleblower must be represented by an attorney.
If multiple whistleblowers submit the same or related information, the 10 to 30% award may be split between the parties based on timing and usefulness of the information provided. Examples of whistleblower information can include Ponzi or Pyramid schemes, price manipulation, theft, insider trading, bribery, and other fraudulent conduct.
Whistleblower Awards Continue to Increase
Based on over $6 billion in fines collected due to reporting through the whistleblower program, the SEC has paid more than $1.6 billion in whistleblower awards since the establishment of the SEC Whistleblower Program. In addition to the most recent $279 million, several large awards have been made previously including awards for $114 million, $110 million, and three $50 million awards. To date, over 26,000 whistleblower reports have been made by individuals in every state and 114 different countries.
