SEC Whistleblower Office Issues $275K Award

April 8, 2016

The U.S. Securities and Exchange Commission (SEC) issued an Order on Tuesday, April 5, 2016, stating that it will pay a whistleblower over $275,000 for information the whistleblower provided to the SEC that led to a successful enforcement action.  Due to the SEC’s commitment to maintaining the anonymity of whistleblowers, the agency did not provide any information about the whistleblower’s name, the company name, or even the total amount that the company was penalized.  This commitment is critical—being labeled a whistleblower could cost an employee not only her current job, but the ability to secure future employment as well.

Interestingly, the SEC noted in its Order that the whistleblower’s award “shall be subject to an offset for any monetary obligations (including disgorgement, prejudgment interest, and penalty amounts) that, as of the date of this order, remain unpaid from the Final Judgment entered against [the whistleblower.]”  In other words, the whistleblower was subject to an obligation for a judgment that had been made against him or her, and the SEC ordered that part of the whistleblower’s award be used to satisfy those obligations.  Although the SEC did not make clear the nature of the judgment to which the whistleblower was subject, it does highlight the fact that even someone who has had legal or financial issues in the past is still eligible to earn an award for valuable information provided to the SEC.

The SEC Office of the Whistleblower pays monetary awards to persons who assist the Securities and Exchange Commission in the enforcement of U.S. securities laws.  Established by the Dodd-Frank Act of 2010, the program provides such incentives to individuals who report violations of the laws that govern a wide range of activities in the financial markets and in the activities of U.S. companies doing business abroad.  In enforcement actions resulting in more than $1 million in sanctions, SEC whistleblowers are entitled to receive between 10 and 30 percent of the amount the SEC recovers from wrongdoers as a result of the whistleblower’s information.

To learn more about the SEC Whistleblower Program, read our SEC Whistleblower Practice Guide, written by Katz Banks Kumin partner David J. Marshall.  The Guide provides a comprehensive and up-to-date explanation of the law and valuable practice tips for SEC whistleblowers and their counsel, and also explains the legal protections that SEC whistleblowers have against retaliation.

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