The Securities and Exchange Commission (“SEC”) awarded a whistleblower $5,000,000 after a successful enforcement action was brought against the company using information provided by the whistleblower. The $5,000,000 sum was calculated as a percentage of the monetary sanctions the SEC collected from the company after the whistleblower voluntarily provided original information, saving the SEC time and resources. This is the seventh award the SEC has issued in the last month.
The SEC issued the first whistleblower award in 2012 and since then has issued approximately $430,000,000 to 80 individuals. All payments are made from an investor protection fund established by Congress that includes monetary sanctions paid to the SEC by securities law violators.
In order for an award to be granted, the SEC considers the following:
- the significant of information provided to the SEC;
- the assistance provided in the SEC action;
- law enforcement interest in deterring violations by granting awards;
- participation in internal compliance systems;
- unreasonable reporting delay; and
- interference with internal compliance and reporting systems. 17 C.F.R. § 240.21F-6.
In this case, the SEC determined that an award should be granted for the following reasons: the whistleblower’s information led to an enforcement action, the whistleblower provided a critical document (saving the SEC time and resources), the whistleblower conveyed the information soon after learning about the conduct, and the whistleblower was uniquely harmed by being terminated by the company after raising his concerns internally.
Whistleblowers may be eligible to receive an award if they provide original, timely, and credible information that results in a successful enforcement action. Awards range from 10-30% of the amount collected, provided monetary sanctions are above $1,000,000. The identity of whistleblower’s identity is kept confidential as set forth in the Dodd-Frank Act.
Wilson Bradshaw LLP is a boutique securities law firm in Irvine, California and New York City. We help companies prepare compliant offering materials and file whistleblower complaints for individuals that have invested in non-compliant offerings. Additionally, if you or your company has received a subpoena from the SEC, we can assist you. We restrict our practice to securities law, focusing on private and public offerings and SEC enforcement work.