An unnamed whistleblower will receive an award of between US $5 and $6 million because of information voluntarily provided to the Securities and Exchange Commission that led to a successful enforcement action. According to the SEC, the claimant was “…a former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information." In the SEC’s order regarding this matter, the Commission redacted the name of the claimant and the covered action, but indicated that the final amount received by the whistleblower will be a percentage of the ultimate amount collected as a result of the enforcement action. This is the SEC’s third largest award to a whistleblower. Previously, the SEC has granted awards as high as US $30 million and US $14 million. Recently, the Commodity Futures Trading Commission announced a US $10 million award to a whistleblower under its equivalent process.
Culture and Ethics: Both under applicable securities and commodities law, potential whistleblowers are incentivized to voluntarily provide tips of wrongdoing to the SEC and CFTC, respectively, in return for payments of between ten and 30 percent of any collected sanctions exceeding US $1 million. (Click here to access the relevant provision from the Securities Act of 1934 and here for the related SEC rules. Click here to access the relevant provision from the Commodity Exchange Act and here for the related CFTC rules.) Relevant law prohibits an employer from engaging in any retaliatory actions against a whistleblower. A federal cause of action exists for claims of retaliation with potential relief, including reinstatement, back pay and compensation for other expenses. It is obviously preferable for a company if an employee discloses possible wrongdoing internally, rather than to a government agency. Although no action may be taken by a company to prevent whistleblowing to the SEC or CFTC, action may be taken to encourage internal whistleblowing. This can happen through development of a culture of openness where employees are expected to disclose all suspicions of wrongdoing internally and without fear of retaliation of any kind. A firm should provide multiple avenues to report wrongdoing—not solely through the vertical chain of command of supervisors above an employee, but laterally through unrelated persons such as human resources or compliance personnel. Internally given cash rewards for whistleblowing should be considered. If employees feel comfortable reporting possible wrongdoing internally, they will feel less inclined to report it externally. But again, if they do, no retaliatory measures may be taken, directly or indirectly.