On March 2, 2015, the SEC announced an award between $475,000 and $575,000 to a former officer who reported original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million. (In the Matter of the Claim of Award, Release No. 74404, March 2, 2015). This marks the first time that a former officer has received an award. In making the award, the SEC noted that it first determined that the claimant had provided original information, and then it considered whether the information was derived from the claimant’s independent knowledge or independent analysis. Rule 21F-4(b)(iii)(A) provides that unless an exception applies, “[t]he Commission will not consider information to be derived from [a whistleblower’s] independent knowledge or independent analysis” if the whistleblower “obtained the information because” the whistleblower was “[a]n officer, director, trustee, or partner of an entity and another person informed you of allegations of misconduct, or you learned the information in connection with the entity’s processes for identifying, reporting, and addressing possible violations of law[,]” 17 C.F.R. §240.21F-4(b)(iii)(A). Here, the claimant’s information was not disqualified because the claimant reported the information to other responsible persons at the entity, or such persons knew about it, at least 120 days before the claimant reported the information to the Commission.
Andrew Ceresney, the Director of SEC’s Division of Enforcement, in commenting on the award, stated that “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.” This most recent award should serve as a reminder to companies that whistleblowers can be found at any level, and a company’s failure to address internally reported potential fraud within 120 days can result in the report being made to the SEC.