On March 19, 2018 the SEC announced its largest whistleblower award to-date, awarding $49,000,000 jointly to two claimants and $33,000,000 to a third for a total of $82,000,000. The claimants each voluntarily provided information to the SEC that aided in the investigation and eventually led to the successful pursuit of perpetrators of sophisticated and long-running securities violations.
This award beats the SEC’s previous high-water mark for an award made to a single whistleblower—$30 million in 2014. It is also significant when compared to the total paid to all whistleblowers in 2017—$49,041,304.95, as reported in the 2017 Annual Whistleblower Program Report.
In announcing the awards, the SEC noted that whistleblowers can provide the SEC with “incredibly significant information that enables [the SEC] to pursue and remedy serious violations that might otherwise go unnoticed”. It is interesting to note that the perpetrators had met with FINRA and the SEC in 2009 and thereafter to discuss the suspected securities violations. Despite that fact, the whistleblowers’ contribution of “original, timely and credible information” in relation to the conduct in issue was considered to merit an award.
The SEC launched its whistleblower program in 2011 as a part of the Dodd-Frank Act. The number of tips received has increased in every year since the program’s inception, with 4,484 tips in 2017. Importantly, since 2011, the SEC has awarded $262 million to 53 whistleblowers. There are six main steps that must be taken before a whistleblower is able to receive an award: 1) whistleblower submits tips to SEC; 2) tips are analyzed and matter is investigated; 3) cases are filed and penalties are ordered; 4) Notices of Covered Actions are posted; 5) whistleblowers file their claims; 6) awards are determined.
The Ontario Securities Commission launched its own Whistleblower Program in July 2016. By October of 2016, it had already received 30 tips. Similar to the SEC program, the Ontario program awards whistleblowers who provide information leading to a successful enforcement proceeding, where certain conditions are met. Whistleblowers are eligible for an award of between 5 and 15% of the total sanctions imposed and/or voluntary payments made where the amounts total $1 million or more.
In January of 2018, the OSC published a request for comment proposing a change to the Whistleblower Program. The proposed change clarifies that in-house counsel are ineligible for whistleblower awards:
“in Ontario, in-house counsel acting in a legal capacity are ineligible for a whistleblower award because their duty to protect the confidentiality of their clients’ information would preclude them from making a whistleblower submission under the rules governing the legal profession in the province”
The proposal is the subject of public comment and has yet to be adopted.
In contrast to the American experience, with numerous proceedings driven by jaw-dropping payments to whistleblowers, the Canadian regulators have yet to successfully pursue a whistleblower-prompted proceeding. Until the public starts to see these cases brought, it is difficult to determine the impact of the program on enforcement activities and priorities in Canada.