Why it matters

Continuing its recent streak of notable whistleblower awards, the Securities and Exchange Commission (SEC) announced more than $2.2 million in the first award under the “safe harbor” of Exchange Act Rule 21F-4(b)(7). The Rule provides that if a whistleblower submits information to another agency and then provides the same information to the SEC within 120 days, the SEC will treat the information as though it had been submitted to the SEC at the same time it was shared with the other agency. “Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, said in a statement about the award. Last month, the agency announced a record-setting $50 million award for two individuals and a third garnering more than $33 million, eclipsing the prior high of $30 million in 2014.

Detailed discussion

In its first award applying the “safe harbor” of Exchange Act Rule 21F-4(b)(7), the Securities and Exchange Commission’s (SEC) Office of the Whistleblower gave $2.2 million to an individual who reported information to the SEC after first reporting it to another agency.

Rule 21F-4(b)(7) states: “If you provide information to … any other authority of the federal government … and you, within 120 days, submit the same information to the Commission pursuant to Section 240.21F-9 of this chapter, as you must do in order for you to be eligible to be considered for an award, then, for purposes of evaluating your claim to an award … the Commission will consider that you provided [the] information as of the date of your original disclosure, report or submission to one of these other authorities or persons.”

In the case at hand, the whistleblower voluntarily reported information to a federal agency covered by the Rule, which in turn made a referral to the SEC based on the information. SEC enforcement staff responded by opening an investigation that led to an action. Within 120 days of the original report, however, the whistleblower provided the same information to the SEC (albeit after the investigation had already begun).

Based on these facts, the SEC found that the whistleblower satisfied Rule 21F-4(b)(7) and was eligible for a $2.2 million award.

“Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, said in a statement. “This award shows that whistleblowers can still receive an award if they first report to another agency, as long as they also report their information to the SEC within the 120-day safe harbor period and their information otherwise meets the eligibility criteria for an award.”

The Office of the Whistleblower has been busy lately. Last month, the prior record of $30 million for a whistleblower award was shattered by a $50 million award for a pair of claimants and another $33 million for a third whistleblower.

“These awards demonstrate that whistleblowers can provide the SEC with incredibly significant information that enables us to pursue and remedy serious violations that might otherwise go unnoticed,” Norberg said. “We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.”

Since the program’s inception in 2012, the SEC has awarded more than $264 million to 54 whistleblowers.

To read the SEC’s order determining the $2.2 million award, click here.

To read the order for the $50 million and $33 million awards, click here.