For the first time ever, the Securities and Exchange Commission has issued a lower whistleblower award because the whistleblower, a former investment firm employee, waited too long before reporting the misconduct. In this case, only after leaving the company. The whistleblower’s tip helped the SEC to take successful enforcement action against the company. And while the whistleblower received an award of USD 325,000 for providing information about the alleged misconduct and identifying the individuals concerned, the award could have been higher had the former employee reported it to the SEC earlier.
The SEC encourages employees to report ongoing misconduct as soon as possible. The law protects whistleblowers against retaliation and the SEC does not intentionally disclose their identity. The Dodd-Frank Act and SEC’s programme do not require that the whistleblower report internally first to be eligible for a bounty. Companies should be aware of the SEC’s request that whistleblowers report possible misconduct as soon as possible. To avoid t whistleblowers from reporting externally first, companies should bring the possibility of filing an internal report to everyone’s attention and quickly respond to reports filed.
Below you will find the press release and to learn more about the SEC whistleblower programme and recent trends and figures.
The SEC whistleblower programme started in 2011 entitling whistleblowers to an award for providing information that leads to successful enforcement. The awards are between 10% and 30% if more than USD 1 million is collected in recoveries. In total, USD 54 million has been awarded to 22 whistleblowers in approximately five years. The largest award, more than USD 30 million, was awarded in 2014.
The SEC recently published its annual report. It revealed that over USD 37 million was awarded in 2015, and a record number of tips – nearly 4,000 – was received. That is 30% percent more than 2012, the first year that the SEC has full year data for. The tips were not only filed by US citizens: a large number of submissions were received from the UK, Canada, India and Australia. In 2015, the SEC took its first successful anti-retaliation enforcement action under the Dodd-Frank Act. The whistleblower who provided the information was awarded with the 30% statutory maximum.