On September 6, the SEC announced a whistleblower award totaling more than $54 million— $39 million to one (the second-largest award given under the SEC’s whistleblower program) and $15 million to another—for critical information and continued assistance, which helped the agency bring an enforcement action. The redacted order highlights the denial of related-action claims by both claimants and notes an exception made to the “voluntary submission” requirement for claimant two.
According to the order, the SEC denied claimant one’s request for an additional award based on another agency’s related action, because the claimant failed to demonstrate the causal relationship required to establish that the “submission significantly contributed to the success of the [related action].” Specifically, the SEC noted that the claimant’s information was never directly transmitted to the other agency, which relied on the SEC’s order to pursue its action. The SEC rejected the claimant’s argument that providing information directly to another agency would be “at war with Congress’ clear instruction that the identity of a whistleblower must be protected” due to the fact that the other agency may not offer the same anonymity as possible under the SEC’s whistleblower program. The SEC notes that while a whistleblower may choose not to provide the information to another agency themselves, the rules allow for the SEC to transmit the information directly, while requiring the other agency to maintain confidentiality, which was not done in this case.
The SEC also denied claimant two’s related action request, concluding that the claimant should seek an award through the alternative program available from the other agency. The SEC noted that if the claimant were to receive a related-action award there would be the potential that the cumulative award would exceed the 30-percent ceiling established by Congress and would produce an “irrational result” encouraging “multiple ‘bites at the apple’” as it would allow whistleblowers to have multiple opportunities to adjudicate and obtain separate rewards on the same enforcement actions.
Notably, for claimant two, the redacted order demonstrates that the SEC made an exception to the “voluntary” submission requirements under the rules. Specifically, Rule 21F-4(a)—in order to create an incentive for whistleblowers to proactively provide information about possible violations—requires that a whistleblower “must come forward before the government or regulatory authorities designated in the rule seek information from the whistleblower.” In this instance, it was undisputed that claimant two provided the SEC information after an investigative review by another agency; however, the SEC exercised discretionary authority to grant a limited waiver of Rule 21F-4(a) and permit an award to claimant two. The SEC determined that a limited waiver was appropriate because, although claimant 2 previously “appeared before [the other agency] for an investigative interview” regarding the same violations, at the time of that appearance the claimant was unaware of the information that would ultimately be deemed by the SEC to be the “critical basis” for the whistleblower claim. The SEC concluded that once claimant two became aware of the critical information, they promptly reported it to both agencies, despite no legal obligation to do so and having no other “self-interested motive to come forward,” achieving a primary policy goal of the program to encourage prompt reporting of information about possible securities law violations.