SEC Awards Over $3M to Whistleblower

In the third highest award that the Securities and Exchange Commission has issued under its whistleblower program, the regulator is giving one individual $3 million for providing information that helped expose a complex fraud. The tip provided by the whistleblower included details and specifics about the scam, which would have been difficult to detect otherwise. Related actions also resulted because of the information this person provided.

Since inception four years ago, the SEC whistleblower program has paid out over $50 million to 18 whistleblower. The biggest award to date was $30 million, issued last year. A $14 million whistleblower award was issued in 2013.

Under the program, whistleblowers that provide the regulator with original information that helps the SEC pursue a successful enforcement action are eligible for 10-30% of the money collected if the sanction exceeds $1 million. The SEC is legally bound to protect the confidentiality and identity of whistleblowers.

According to SEC Chair Mary Jo White, in the 2014 Fiscal year, the Commissioner received over 3,600 tips. It received around 3,200 tips the previous year. This year, the Whistleblower Office saw a 20% rise in tips during the first quarter compared to last year. White says the quality of the tips has also improved.

The 2010 Dodd-Frank Act expanded the remedies and protections for retaliations against whistleblowers. Not only are employers forbidden from firing, suspending, demoting, harassing, threatening, or suspending a whistleblower from coming forward with the information, but also now a whistleblower has the right to bring an action for that retaliation, as does the SEC.

Last year, the SEC brought and settled its first action against a company that retaliated against a whistleblower. The hedge fund trader told the company of notifying the SEC that prohibited transactions may have taken place at the firm. The company immediately removed the individual from the position of hedge fund trader and revoked supervisory duties.

The SEC filed a case against the firm and its principal for allegedly engaging in prohibited transactions. The company was eventually ordered to pay $2 million in monetary sanctions, and the whistleblower was awarded 30% of that award—over $600,000.

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SEC Order Regarding the Whistleblower Award (PDF)

Dodd-Frank Act’s Whistleblower Protections (PDF)