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SEC pays $325K whistleblower award but warns it could have been more

Posted  November 5, 2015

Yesterday, the SEC sent a message, and it wasn’t subtle: speed counts. The agency announced it was making a $325,000 award to the 22nd whistleblower to receive an award under the SEC’s whistleblower program since its inception in 2011.  But its press release also stressed that “the award could have been higher” had the whistleblower not “hesitated” to bring his or her information to the Commission.

The press release praised the whistleblower, commenting that s/he was an “investment firm employee” who “tipped the agency with specific information that enabled enforcement staff to open an investigation and uncover the extent of the fraudulent activity.” Further, the whistleblower helpfully provided a detailed description of the misconduct and specifically identified individuals behind the wrongdoing.

However, the SEC was not shy in voicing its disappointment with the whistleblower’s timing, namely his or her decision to wait until after departing the offending firm to approach the SEC about the illegal activity.

Whistleblowers who voluntarily provide original information to the SEC regarding securities violations may be eligible to receive 10 to 30% of recoveries by the SEC based on their information. Here, it appears, the whistleblower may have received on the lower end of this range.  The SEC’s press release quoted Andrew Ceresney, Director of the SEC’s Division of Enforcement as saying, “Corporate insiders who become aware of securities law violations are encouraged to come forward without delay in order to prevent misconduct from continuing unabated while investors suffer more harm.”  Sean McKessy, Chief of the Office of the Whistleblower, was even more explicit, reiterating the Commission’s gratitude for the information and assistance provided by the whistleblower but disappointment in his or her hesitation to come forward, stating, “This award recognizes the value of the information and assistance provided by the whistleblower while underscoring the need for whistleblowers to report information to the agency expeditiously.”

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