Former Insider Who Tipped SEC to Misconduct Awarded $4.1M

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Phyllis Diamond

A former corporate insider who alerted the SEC to a widespread, ongoing securities law violation has been awarded a $4.1 million bounty, the agency said Dec. 5.

The unidentified insider, a foreign national working outside the U.S., also provided important information and other assistance throughout the investigation, the Securities and Exchange Commission said.

In approving the amount of the award, the SEC said these positive considerations were “somewhat offset” by the whistleblower’s “unreasonable delay” in reporting the violation, but that it nonetheless agreed with the claims review staff’s determination.

Under a Dodd-Frank Act cash award program, whistleblowers who provide tips that result in SEC sanctions of $1 million or more are eligible for a bounty of between 10 and 30 percent of the penalties. Less than a week ago, two whistleblowers were awarded bounties of $8 million apiece.

Sufficient Nexus

The agency’s largest bounty award—$30 million in 2014—also went to a foreign national. At the time, the SEC said there is a “sufficient U.S. territorial nexus” when a claimant’s information leads to a successful SEC enforcement action in the U.S. based on U.S. securities law violations.

“When these key territorial connections exist, it makes no difference whether, for example, the claimant was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the U.S. securities law violation occurred entirely overseas.”

Bounties also have been awarded to a corporate insider who reported a fraud in which the individual bore “some, albeit limited, culpability,” and to an unidentified government employee who the SEC said wasn’t subject to restrictions for employees of a “law enforcement organization.” Last year, a former Deutsche Bank AG risk officer reportedly refused an $8.25 million award for blowing the whistle on the lender’s overvaluation of a derivatives portfolio because the SEC didn’t go after senior executives.

Awards are paid out of a special fund financed entirely through monetary sanctions paid by securities law violators. The fund contained approximately $321.7 million at the end of fiscal 2017, an SEC report to Congress said.

To contact the reporter on this story: Phyllis Diamond in Washington at

To contact the editor responsible for this story: Seth Stern at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law