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SEC Starts 2020 with Almost $12 million in Whistleblower Awards

Posted  April 9, 2020
By Carolina Gonzalez

Despite the Covid-19 pandemic, the SEC whistleblower program is very much open for business: the SEC has announced seven whistleblower awards in the past four months, including an award of over $7 million to a “tenacious” whistleblower who provided extensive and sustained assistance in connection with serious financial abuses despite suffering hardship.

Under the program, whistleblowers – regardless of their citizenship or residency – who provide information about possible violations of securities laws may receive between 10% and 30% of the government’s recovery if their information helps the SEC bring an enforcement action where over $1 million in monetary sanctions is ordered.  The program offers confidentiality and anti-retaliation protections to whistleblowers regardless of their citizenship or whether they are or were company insiders.  Since opening in 2012, the SEC has paid around $398 million to 78 individuals, including $37 million to an individual whistleblower.  Examples of SEC-covered financial fraud include misrepresentations, regulatory violations (such as failing to register securities or conducting improper transactions), market manipulation and trading variations, as well as insider trading. The SEC also enforces the Foreign Corrupt Practices Act (FCPA), therefore, whistleblowers who provide information about possible FCPA violations may qualify for an award.

No piece of information is too small when combating fraud

The seven awards issued in the past four months underscore that no piece of information is too small – every contribution is important when it comes to combating fraud.  As the SEC has previously explained, whistleblowers who provide specific information, and cooperate with the SEC beyond the initial submission are more likely to receive awards.  While the SEC does not provide details about the underlying enforcement action when announcing whistleblower rewards, the press releases do provide some information, including about the factors the SEC takes into account when determining an award – both positive factors (e.g. availability to assist, hardship as a result of whistleblowing, timely reporting, location of assets or use of internal reporting channels) and negative ones (e.g. unreasonable delays in reporting):

  • $2 million on April 3, 2020 – for timely reporting significant new information during an ongoing investigation that would have been difficult for the SEC to obtain, despite the implied threats and hardships suffered by the whistleblower;
  • $1.6 million on March 23, 2020 – for providing information and assistance early in the investigation, saving staff time and resources, despite unreasonable delay in reporting;
  • $450,000 on March 30, 2020 – for providing significant information that helped focus an ongoing SEC investigation, despite suffering unique hardships as a result of internal reporting. The whistleblower was reportedly an employee involved in compliance-related activities, a category of individuals who also qualify for awards provided they first report internally and wait 120 days to report to the Commission;
  • $7 million on February 28, 2020 – for helping understand complex fact patterns and issues used by the SEC to devise an investigative plan with initial document requests while providing extensive and ongoing assistance. Here, the SEC noted the whistleblower’s “tenacity” and persistent efforts to remedy the issues while suffering hardship;
  • $570,000 on March 24, 2020 – split between two whistleblowers. First whistleblower received $478,000 for reporting significant information which helped bring antifraud charges related to ongoing conduct when the whistleblower first reported it to the Commission and for reporting the information to another agency in a related action.  Second whistleblower received $94,000 for information that was also important, but contributed to charges against only one of the defendants;
  • $277,000 on January 22, 2020 – for coming forward with significant information about an ongoing fraud scheme preying on retail investors while saving the Commission time and resources. Here, the whistleblower also received a portion of a related action brought by a federal prosecutor; and
  • $45,000 on January 22, 2020 – to a harmed investor for providing new, critical, time-sensitive information that allowed the Commission to recover assets later returned to harmed investors in connection with a fraudulent scheme targeting retail investors. Here, the amount was due to the low monetary sanctions ordered.

Whistleblowers May be Eligible for an Award under Whistleblower Programs of Several Countries

According to its annual report to Congress, in 2019, the SEC received the second highest number of tips in program history (over 5,200).  Furthermore, international whistleblowers from 70 different countries submitted 9% of overall tips. Canada, Germany, and the United Kingdom accounted for the highest number of tips, but individuals from Australia, China, India, Russia, South Africa, and Brazil also submitted tips. Many of these countries, particularly Canada and the United Kingdom, have either implemented or are implementing legislation to protect and reward whistleblowers. The Ontario Securities Commission (OSC) has paid more than $8 million to whistleblowers since the program’s inception in July 2016.  Recently, the OSC issued a $525,000 award to a company outsider who used  industry expertise to identify market irregularities.

Whistleblowers worldwide should be aware of the potential multi-jurisdictional dimensions their cases may present.  For example, whistleblowers with information about possible commodity and securities laws violations involving a company whose stock trades both in an American exchange and in the Toronto Stock Exchange may be eligible to receive awards under the SEC, CFTC, and OSC whistleblower programs.  The need for specialized counsel is paramount in helping identify applicable programs and the best way to interface with multiple regulators.

The Whistleblower Team at Constantine Cannon is highly experienced in helping potential whistleblowers evaluate their claims. Thanks to the firm’s successful history partnering with enforcement agencies, our attorneys know how to provide effective assistance and counsel for whistleblowers both in the US and abroad. If you would like to know more or schedule a confidential consultation, please contact us to see how we can help.

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Tagged in: Anonymity, Financial and Investment Fraud, Importance of Whistleblowers, International Whistleblowers, SEC Whistleblower Reward Program,


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