SEC Announces Additional Payout to Whistleblower

The SEC announced on Friday that it made an additional payout of $150,000 to the recipient of the first monetary award under the SEC Whistleblower Program, after successfully collecting more sanctions from one of the defendants in the action. With that additional payout, the whistleblower – who is entitled to receive up to 30% of any sanctions collected by the SEC under the original award order – has received a total of nearly $200,000. The SEC is now continuing its efforts to collect additional funds from the defendants, meaning the final award to the whistleblower is likely to be even bigger. This whistleblower reported the “multi-million fraud” at issue anonymously, and has not been identified by the SEC. Indeed, as in other cases, the SEC has revealed almost no information about the underlying case, such as the name of the defendants, in an effort to protect the whistleblower’s confidentiality – an encouraging sign for other individuals considering coming forward on an anonymous basis.
While this new payout may not grab as many headlines as larger awards like the $14 million award paid in October, it’s a positive reminder that monetary awards available under the SEC Whistleblower Program have the potential to grow over time if the original information provided by the whistleblower leads to additional recoveries. (As explained in our SEC Whistleblower Program Handbook, the total sanctions ordered in enforcement actions resulting from the whistleblower’s tip must exceed $1 million for a whistleblower to be eligible for a monetary award). That potential can be especially significant in cases involving multiple defendants: for example, if an eligible whistleblower reported accounting fraud at his or her company, resulting in the SEC ordering aggregate sanctions of more than $1 million against both the company and its auditor, the whistleblower could receive 10-30% of the total sanctions collected from both defendants, even if the case against the auditor was resolved months or years after the case against the company (or vice versa).

Ultimately, the objective of the SEC Whistleblower Program is to detect and deter harm to investors by aligning the interests of whistleblowers, investors and the Commission – all of who win if the SEC is able to recover funds from those who violate the securities laws, especially since awards to whistleblowers do not come from, or reduce, funds used to pay back damaged investors. Payouts like this one bring the program one step closer to that goal.
– By Jordan Thomas and Vanessa De Simone