In the first anti-retaliation case against a New York-based hedge fund advisory firm, the SEC recently announced that the whistleblower at the centre of the case would receive the highest possible award: 30% of the penalties issued. We first reported on this case in July 2014. The whistleblower, according to the SEC, provided key original information that led to successful enforcement action. The reason for issuing the highest possible award was that the whistleblower had suffered unique hardships, including retaliation. As the penalty amount collected exceeded USD 2 million, the whistleblower will receive more than USD 600,000. This award shows, according to the SEC, that the SEC is committed to protecting whistleblowers against retaliation. Companies are advised to refrain from taking retaliatory action and to make sure that their internal policies do not silence whistleblowers.
US law prohibits employers from dismissing, demoting, suspending, threatening, harassing, or in any other manner discriminating against whistleblowers. In this case, the company engaged, according to the SEC, in a series of retaliatory actions against the whistleblower one day after his actions were revealed. The whistleblower was moved from his position as head-trader to assistant compliance officer and tasked with investigating the very conduct that he had reported to the SEC. He was also denied access to his email account and to account systems. The whistleblower eventually resigned from his job as a result of the retaliation. The SEC granted him the maximum whistleblower award of 30 percent to send a clear message.
This award payment is part of a trend where the SEC increasingly sees itself as the whistleblower’s advocate: “We want whistleblowers – and their employers – to know that employees are free to come forward without fear of reprisals”. This latest reward shows the Commission’s continued support of its whistleblower programme.
The SEC whistleblowing programme started three years ago. To date, the SEC has awarded 17 whistleblowers with payouts totaling over USD 50 million. The highest award so far was for more than USD 30 million. Not only does the SEC protect whistleblowers once they have reported information to the commission, it also prevents individuals and entities from taking steps to silence potential whistleblowers. The SEC recently fined a company USD 130,000 for using improperly restrictive language in confidentiality agreements that had the potential of stifling the whistleblowing process.
Companies are advised to implement a conduct policy that addresses whistleblowers who come forward. The SEC will protect whistleblowers’ rights, and these awards give a clear signal that whistleblowers may not be harmed.