SEC Whistleblower Awards

The whistleblower process provides disappointed whistleblowers with specific windows for appeal. After the Claims Review Staff issues a Preliminary Determination, you have 30 days to request a review of the record and 60 days from the receipt of the administrative record to submit a written response, of no more than 20 double-spaced pages. If the Commission issues a Final Order that remains unsatisfactory, you can petition for review in the U.S. Court of Appeals within 30 days. Since the Commission has been given broad discretion to make determinations of what amounts to make SEC Whistleblower Program awards and each stage of the appeals process can take years, it rarely makes sense to appeal award percentage determinations by the Commission.

SEC Insider Tip: After receiving an adverse Preliminary Determination, sophisticated whistleblowers immediately hire experienced appellate counsel, like the team at SEC Whistleblower Advocates, to file a robust request for reconsideration because most such requests are denied and it is the last chance to perfect the administrative record that will be reviewed by the U.S. Court of Appeals.

Yes, the SEC whistleblower program allows for multiple payouts on a single covered action. If the first whistleblower provides the spark for the agency's investigation and a second whistleblower later provides credible information that expands the scope of the investigation or significantly contributes to its success, both may be eligible for an award. The total award, 10-30% of the monetary sanctions collected, is allocated amongst the whistleblowers based on the relative value of each whistleblower's information. However, their total award can never go below 10% or greater than 30%.

SEC Insider Tip: If you suspect that the Commission has already opened an investigation or examination, don't walk away from reporting. Consult with an attorney about filing your whistleblower complaint, even if you suspect someone else has reported, as your evidence might be what leads to a successful enforcement action.

An SEC whistleblower may report any violation of the federal securities laws, and those violations can occur anywhere in the world. In fact, during the first few years of the program, a whistleblower received a $30 million award for reporting overseas wrongdoing. Typically, overseas securities fraud involves a company listed on a U.S. exchange or a firm registered with the Commission, like an investment adviser or broker-dealer. Historically, the most common types of international violations have been: financial and disclosure fraud, offering fraud, market manipulation, insider trading, and Foreign Corrupt Practices Act (FCPA) violations.

Congress specifically designed the Investor Protection Fund to pay large whistleblower awards and for the fund to automatically replenish itself when the balance drops below $500 million. Payments to whistleblowers are financed entirely through monetary sanctions paid to the SEC by securities law violators. No money is taken or withheld from harmed investors to pay these awards. Since the program's inception, the Commission has never had a problem paying out a whistleblower award, including the largest SEC whistleblower award to date, $279 million. SEC Whistleblower Advocates regularly advises our clients not to worry about the Commission's ability to pay their whistleblower awards but to focus on other things that are more significant and that they can influence.

SEC Insider Tip: If you are concerned about the Commission's ability to pay your whistleblower award, monitor the SEC Whistleblower Program's annual report to Congress, which includes the current balance of the Investor Protection Fund and recent successful SEC enforcement actions resulting in payouts.

No. Actually, in Rule 6, the SEC explains that the participation of a whistleblower in internal reporting systems, which is defined broadly, is a factor that increases the amount of a whistleblower award. The only time it becomes a negative factor is if you report internally and then somehow interfere with your company's internal compliance and reporting procedures. While it is a rare occurrence, whistleblowers sometimes get in trouble for delaying their company's investigation in someway or trying to protect themselves and others from internal scrutiny.

SEC Insider Tip: After reporting internally, sophisticated whistleblowers also report to the Commission within 120 days, so their effective filing date will be when they first reported their concerns internally.