In a rare move, the Securities and Exchange Commission issued whistleblower awards to three individuals who held compliance roles at an unnamed company.
In a statement, the SEC said that it had awarded more than $1 million to three individuals whose information and assistance led to a successful enforcement action. While the whistleblowers held compliance roles at the company, they remained eligible for an award because they submitted their information to the Commission more than 120 days after the alleged conduct had been reported internally. The SEC said in a statement that the first claimant, who received the highest award, “provided extraordinary assistance and comprehensive information that proved vital to the success of the enforcement action.”
Not Eligible, Unless…
When the SEC finalized the Dodd-Frank whistleblower provisions in 2011, it listed compliance and internal audit professionals among those who are not eligible for whistleblower award under the program, along with corporate attorneys, public accountants, and officers and directors acting on information passed on to them by another employee.
In the ruling however, the SEC laid out a series of exceptions where internal audit and compliance professionals, as well as public accountants, could participate in the whistleblower program. Those circumstances include:
- The whistleblower believes disclosure may prevent substantial injury to the financial interest or property of the entity or investors.
- The whistleblower believes that the entity is engaging in conduct that will impede an investigation.
- At least 120 days have elapsed since the whistleblower reported the information to his or her supervisor or the entity’s audit committee, chief legal officer, or chief compliance officer—or at least 120 days have elapsed since the whistleblower received the information, if the whistleblower received it under circumstances indicating that such officials are already aware of the potential wrongdoing.
The more recent compliance recipients were eligible only because they first reported the wrongdoing internally and waited the required 120 days.
Additional Awards
In the statement, the SEC also announced that it had also given whisteblower awards to two other non-compliance individuals in separate cases. In the first enforcement proceeding, the SEC awarded approximately $1.2 million to a whistleblower who provided valuable independent analysis based upon a complex algorithm the whistleblower developed and applied to publicly available data. In the second, the SEC awarded a whistleblower more than $350,000 for providing independent analysis that led to a successful enforcement action. “Based on unusual effort and expertise developed over many years, the whistleblower identified patterns among publicly available information that allowed the Commission to quickly identify and prevent wrongdoing and to preserve assets,” the SEC said.
“Today’s awards demonstrate the Commission’s commitment to reward whistleblowers who provide valuable information, developed either from a whistleblower’s independent knowledge or the whistleblower’s independent analysis, which substantially contributes to a successful enforcement action,” said Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower.
Nearly $1 Billion in Awards
The SEC has awarded approximately $959 million to 203 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely 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. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.
As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity.
Joseph McCafferty is editor & publisher of Compliance Chief 360°