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Screenshot of a breaking news alert e-mail from Q2 2017
It is clear that US securities industry regulator the Securities and Exchange Commission (SEC) is pleased with its Whistleblower program.
While bureaucratic / government offices seldom put out puffery-like press releases, the SEC is clearly heavily marketing its Whistleblower program and enticing future potential tattle-tellers by dangling the very large carrot of multi million dollar awards.
Today, the SEC informed of its latest award paid under its Whistleblower program – a $22 million award to a company insider whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistleblower worked. The $22 million-plus award is the second-largest total the SEC has awarded a whistleblower. The largest, $30 million, was awarded in 2014.
The SEC gave few other details to identify the individual or the company involved. It has been giving out less and less specific information lately, presumably to convince future potential whistleblowers that their anonymity will indeed be protected if they come forward.
The $22 million award brings the grand total paid out by the SEC to just over $100 million since the first award was paid in 2012.
The SEC’s Whistleblower program was established by the U.S. Congress to incentivize whistleblowers with specific, timely and credible information about federal securities law violations to report to the SEC. To date, enforcement actions resulting from whistleblower tips have resulted in orders for more than $500 million in financial remedies, much of which has been returned to harmed investors.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action. Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions ordered exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
The SEC also has brought actions to ensure that employees feel secure in reporting wrongdoing to the SEC, without fear of reprisal from their employers, including one enforcement action under the anti-retaliation provisions of the Dodd-Frank Act and four actions against companies for including language in confidentiality and severance agreements that impeded whistleblowers from reporting to the SEC.
Some other stats the SEC shared include:
- The Whistleblower Office has received more than 14,000 whistleblower tips from individuals in all 50 U.S. states and the District of Columbia, plus from 95 foreign countries.
- Tips from whistleblowers have increased from 3,001 in fiscal year 2012 to nearly 4,000 last year.
- The Whistleblower Office has returned over 13,000 phone calls from members of the public through the whistleblower hotline.
- More than $107 million has been awarded to 33 whistleblowers, with the largest being more than $30 million, as per above.
Because of the information and assistance provided by these whistleblowers, the SEC was able to bring successful enforcement actions where more than $504 million was ordered in sanctions, including more than $346 million in disgorgement and interest for harmed investors.
According to Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower:
This is a watershed moment for the SEC’s whistleblower program. The SEC has issued more than $100 million in whistleblower awards in five years, demonstrating the invaluable information and assistance whistleblowers have provided to the agency and underscoring the program’s resounding success.
More on the SEC’s Whistleblower program can be seen at https://www.sec.gov/whistleblower.