The SEC announced a whistleblower award between $475,000 and $575,000 to a former company officer who reported original, high-quality information about the company’s securities fraud. The award is notable because it is the first award to an officer who learned about a fraud through another employee rather than firsthand.
Under Dodd-Frank, officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally are not eligible for an award. There is an exception however: an officer may be eligible if he or she reports the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue. That is what happened here.
Andrew Ceresney, Director of the SEC’s Division of Enforcement, said company officers have “front-row seats overseeing the activities of their companies,” and noted that the officer who reported in this case “should be commended for stepping up to report a securities law violation when it became apparent that the company’s internal compliance system was not functioning well enough to address it.”
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