WHISTLING A HAPPY TUNE: SEC INFORMANT RECEIVES $20 MILLION AWARD

SEC SealThe SEC awarded more than $20 million to a whistle-blower, resulting in the third-largest award in the four-year history of the program. To date, the SEC has awarded more than $130 million to whistle-blowers who voluntarily provided the SEC with unique and useful information that led to a successful enforcement action.

According to the SEC, the whistle-blower promptly came forward with valuable information that enabled the agency to quickly initiate an enforcement action and recover investor funds before the wrongdoers could squander the money. Jane Norberg, chief of the SEC’s Office of the Whistleblower, stated that “this whistleblower alerted us with a valuable tip that led to a near total recovery of investor funds … sizeable awards like this one should encourage whistleblowers everywhere that there are real financial incentives to promptly reporting potential securities law violations to the SEC.”

It is generally difficult to glean much information from whistle-blower award orders. The SEC heavily redacts the information it releases in order to protect whistle-blower confidentiality, and will not disclose any information that might directly or indirectly reveal a whistle-blower’s identity.

In this instance, the SEC issued a whistle-blower award to one of three claimants. The Commission also disqualified a fourth claimant and did not process that application because that individual "had been previously permanently barred from submitting award applications as a result of numerous false and fictitious statements this claimant made in connection with earlier award claims."

According to the SEC, the successful claimant submitted information that the staff had not previously known and that formed the basis for the enforcement action. All three claimants challenged the preliminary determination made by the SEC’s Claims Review Staff. The successful claimant sought an increased award, while the other two challenged the denial of their claims.

The SEC approved an increase in the amount awarded to the first claimant. Due to the redacted nature of the order, it is not possible to identify the specific conduct that supported the increased award. The Commission did note, however, that the claimant's prompt action allowed the Enforcement Division to quickly shut down the fraud and to obtain a near total recovery of investor funds.

The SEC upheld the denial of whistle-blower awards to the other two claimants. According to the SEC, one of the unsuccessful claimants did not provide original information that led to the successful enforcement of a covered action. The Commission found that the staff was already aware of most of the information provided by the claimant. In addition, to the extent that the claimant did provide original information, the SEC found that this information did not lead to the successful prosecution of the enforcement action. The SEC reached a similar finding that the information provided by the third claimant also did not lead to the successful resolution of the enforcement action.

For more on the whistle-blower awards in fiscal year 2016, see SEC Whistleblower Award Total Reaches Record High