Last week, the SEC announced an award of $700,000 to a company outsider who conducted a “detailed analysis” resulting in a successful SEC enforcement action. In a press release, Andrew Ceresney, director of the SEC’s Division of Enforcement, noted the importance of external “industry experts,” stating that the SEC “will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations.” This award is the first to a company outsider in the Whistleblower Program’s five-year history.
Sean McKessey, chief of the Office of the Whistleblower, explained that this action “demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.” McKessey added that the SEC welcomes “analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.” Prior to this award, the SEC has issued 22 awards under the Whistleblower Program. This first-time award to a company outsider may signal the SEC’s increased interest in receiving and rewarding external analysis from “industry experts.”
The SEC’s Whistleblower Program was created by the Dodd-Frank Act and has been in effect since 2011. Under the Program, eligible whistleblowers may receive awards ranging from 10 to 30 percent of the amount the SEC collects in a successful enforcement action, providing those collections exceed $1 million. In this instance, the SEC’s Claims Review Staff (“Staff”) revealed that the whistleblower will receive more than $700,000, but the agency did not identify the percentage of sanctions collected from the company that this award represents. The Staff also revealed that the same whistleblower provided a similar detailed analysis to the SEC prior to the enactment of Dodd-Frank, which was ineligible for an award at the time of the original submission. The Staff simultaneously denied awards to three other claimants.
Given this decisive expansion of the SEC Whistleblower Program, it is vital for companies to ensure that they have watchful compliance programs in place to determine the sources of and prevent potential securities violations. For further information, see our previous alerts: SEC $3 Million Whistleblower Award to Company Insider Highlights Need for Vigorous Compliance Programs and It Pays to Blow the Whistle: SEC Doles Out Record-Breaking $30 Million Award to Overseas Whistleblower.