Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
March 2 — In a first-of-its kind action, the Securities and Exchange Commission awarded between $475,000 and $575,000 to a former corporate official who blew the whistle on a securities fraud after the firm's compliance personnel failed to act.
In a March 2 release, the agency said the whistle-blower provided “original, high-quality information” that led to an enforcement action resulting in more than $1 million in sanctions.
In the release, the commission noted that officers, directors, and other insiders who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for a whistle-blower award.
However, the commission noted, under an exception to the exclusion, an officer can be eligible for an award if he or she reports the information to the SEC more than 120 days after other responsible compliance personnel had the information and failed to act. “This is the first SEC whistleblower award to an officer under these circumstances.”
“Corporate officers have front-row seats overseeing the activities of their companies, and this particular officer 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,” SEC Enforcement Director Andrew Ceresney said.
The SEC recapped that awards totaling almost $50 million have been made to 15 whistle-blowers since the agency's whistle-blower program was launched more than three years ago.
Payments are made from an investor protection fund financed entirely through monetary sanctions paid by securities law violators, the commission noted. “[N]o money is taken or withheld from harmed investors to pay whistleblower awards.”
“Receiving information and cooperation from company insiders is particularly useful in the early detection of securities fraud, and we will continue to leverage whistleblower information to help combat securities law violations and better protect investors and the marketplace,” SEC whistle-blower chief Sean McKessy said.
“Meanwhile, companies must have rigorous internal compliance programs that adequately address and remedy potential violations voiced by their employees as well as by their officers, directors, or other individuals.”
The SEC made its first whistle-blower award in August 2012—$50,000 to a tipster who helped stop a multi-million dollar fraud.
To contact the reporter responsible for this story: Phyllis Diamond at firstname.lastname@example.org
To contact the editor responsible for this story: Susan Jenkins at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)