The Securities and Exchange Commission announced a record award to an unnamed whistleblower for providing information leading to a successful enforcement action against securities law violations. The SEC said, in a statement, that the whistleblower took “extraordinary” actions to bring the wrongdoing to light.
The $114 million award consists of an approximately $52 million award in connection with the SEC case and an approximately $62 million award arising out of the related actions by another agency. The combined $114 million reward marks the highest award in the program’s history, and eclipses the next highest award of $50 million made to an individual in June 2020.
“Today’s milestone award is a testament to the Commission’s commitment to award whistleblowers who provide the agency with high-quality information,” said SEC Chairman Jay Clayton. “Whistleblowers make important contributions to the enforcement of securities laws and we are committed to getting more money to whistleblowers as quickly and as efficiently as possible.”
“The actions of the whistleblower awarded today were extraordinary,” added Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “After repeatedly reporting concerns internally, and despite personal and professional hardships, the whistleblower alerted the SEC and the other agency of the wrongdoing and provided substantial, ongoing assistance that proved critical to the success of the actions.” The SEC declined to name the recipient of the award, which is common in most SEC whistleblower cases.
The SEC has awarded approximately $676 million to 108 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 percent 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.
Increased Pandemic Whistleblowing
The SEC has received a dramatic increase in the number of whistleblower tips, likely due to the circumstances created by the coronavirus pandemic, including an increase in layoff and furloughs, and many employees working from home.
According to Steven Peikin, co-director of the division of enforcement at the Commission, the agency has received more than 4,000 tips and complaints just since mid-March, compared to 5,212 that it fielded in all of fiscal 2019. “Many are COVID-19 related, but many in other traditional areas,” Peikin said in a May 12 speech. Those numbers have likely climbed during the ensuing months.
With employees working remotely, potential whistleblowers may also feel more secure in filing complaints without direct face-to-face contact with co-workers and bosses and feel more comfortable to act. Employees who have been furloughed or laid-off may have an additional incentive to file complaints, possibly contributing to the increase in whistleblower filings.
While the number of filings is up, the record award is somewhat surprising, considering a Supreme Court ruling earlier this year that experts said could lower the bounties whistleblowers were eligible to claim. 