The Securities and Exchange Commission has awarded more than $300,000 to an internal auditor whistleblower. The SEC said the individual’s “high-quality information and continuing assistance” significantly contributed to a successful enforcement action, earning the whistleblower award. The agency did not reveal the identity of the whistleblower or the company that he or she worked for, which is common practice.
“The whistleblower became aware of the potential securities law violations in connection with audit-related responsibilities,” the SEC said in a statement. Although individuals with audit or compliance responsibilities are generally not eligible for awards, a whistleblower who reasonably believes that an entity is engaging in conduct that would impede the investigation falls within one of the exceptions to that rule. “Here, the whistleblower had a reasonable basis to believe that the entity would impede the Commission’s investigation,” the SEC said.
In a heavily redacted SEC order, the agency said that the whistleblower “aggressively attempted to remedy the misconduct and suffered a unique hardship.” This is the fourth time the agency has paid a whistleblower award to an individual with internal audit or compliance related responsibilities.
Read related article, “What Internal Auditors Need to Know About SEC Whistleblower Law.”
“This award is an example of the important role that audit and compliance professionals can play in assisting the Commission’s enforcement efforts, especially when the entity is attempting to thwart an investigation,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “The whistleblower attempted to remedy the conduct and provided exceptional assistance to the enforcement staff.”
When Internal Auditors Can Claim Awards
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 a subsequent 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 SEC has awarded more than $731 million to 124 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 to 30 percent 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 information that could reveal a whistleblower’s identity. 
Joseph McCafferty is editor & publisher of Internal Audit 360°.