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SEC’s 23rd Whistleblower Award Goes to a “Company Outsider”

Posted  January 20, 2016

On Friday, January 15th, the SEC made an award of more than $700,000 to a whistleblower the agency described as a “company outsider who conducted a detailed analysis that led to a successful SEC enforcement action.”

The SEC’s whistleblower program explicitly provides for financial rewards to company outsiders by allowing “independent analysis” — even when based on publicly available information — to serve as the basis for an award.  17 C.F.R. § 240.21F-4(b).

This award and the SEC’s corresponding press release make clear that the agency takes seriously information from outsiders and is interested in hearing from non-traditional whistleblowers — those who may not have the inside view on a fraud but have the “in-depth market knowledge and experience that may provide the springboard for an investigation.”

The SEC’s award came following several stumbling blocks that could have marked the end of the whistleblower’s pursuit of an award.  Not only was the whistleblower in receipt of the $700,000 award not an insider, s/he was not the only whistleblower, and s/he had submitted information to the SEC before enactment of the SEC’s whistleblower award program.  The SEC’s final order on the award noted that the whistleblower provided a “detailed analysis” to the agency “before the enactment of the whistleblower award program” which could not serve as the basis for an award, but “provided additional analysis” after enactment of Dodd-Frank.  The order also denied the award applications of three other whistleblowers.

Company outsiders with knowledge of market malfeasance should take heart in this award and the SEC’s explicit commitment to “leverage all forms of information and analysis” received from whistleblowers, including “high-quality analysis by industry experts.”

Tagged in: SEC Whistleblower Reward Program, Securities Fraud, Whistleblower Eligibility, Whistleblower Rewards,