A recent SEC announcement shows the continuing rewarding of whistleblowing in the US. The SEC announced on 22 September 2014 an expected award of more than USD 30 million to a foreign whistleblower who provided key information that led to a successful SEC enforcement action. This award is a strong message to whistleblowers from all over the world to come forward with credible information about potential violations of US securities laws. This will be the largest ever award for a whistleblower made under the SEC program.
According to the SEC order, the award could have been even higher if there had been no delay between first learning of the violations and the subsequent reporting to the SEC. The whistleblower’s assertion was that the delay was reasonable since it was uncertain whether the SEC would in fact take action. But the SEC found the delay unreasonable and inexcusable given that investors continued to suffer losses.
The whistleblower in this case, whose name remains anonymous, lives in a foreign country and according to Sean McKessy, Chief of the SEC’s Office of the Whistleblower, this award demonstrates the program’s international reach. According to the order, there is sufficient US territorial nexus whenever information leads to the successful enforcement of a covered action brought in the US concerning violations of the US securities laws. When these key territorial connections exist, it makes no difference whether the whistleblower is a US citizen or living outside the US.
On 17 September 2014, less than a week before this award, Attorney General Eric Holder gave a speech in which he stated that whistleblower bounties should be raised under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Especially compared to the more substantial awards made by the SEC whistleblowing program, the amounts that individuals can receive under FIRREA in exchange for coming forward are limited: they are capped at USD 1.6 million. Holder is of the opinion that they are “a paltry sum in an industry where bonus pools exceed USD 26 billion and these awards unlikely induce employees to risk his or her lucrative career in the financial sector.”
These new developments are a strong message to employees (and companies) both in and outside the US about the SEC’s commitment to whistleblowers and the value they bring to law enforcement.