On January 24, the U.S. Securities and Exchange Commission (SEC) issued a $28 million award to joint whistleblowers who alerted the agency to ongoing fraud, allowing the SEC to return millions of dollars to harmed investors.
Qualified SEC whistleblowers, individuals who voluntarily disclose original information that contributes to the success of an enforcement action, are entitled to monetary awards of 10-30% of the funds collected by the SEC. The SEC Whistleblower Program also offers anti-retaliation protections to whistleblowers.
The SEC treated the four individual whistleblowers as “joint whistleblowers” because they “they jointly submitted their information to the Commission through the same counsel and provided substantively identical whistleblower award applications,” according to the award order. Unless the whistleblowers contest, each will receive 25% of the award.
According to the SEC, the joint whistleblowers “detailed information prompted the opening of the SEC staff’s investigation and significantly contributed to the success of the action.” The award order further notes that the whistleblowers “met with Commission staff on several occasions and provided substantial ongoing assistance throughout the investigation.”
“Whistleblowers play an instrumental role in helping the SEC detect and prosecute wrongdoing and in protecting investors and the capital markets,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. “Whistleblowers perform an incredible public service, as reflected by today’s award.”
The SEC’s award order also outlines an award denial for an individual who filed a whistleblower award claim for the same enforcement action. The SEC determined that the individual did not qualify for an award because their disclosure was not “voluntary.”
According to the award order, the individual sent a letter to the company’s outside counsel “outlining a number of concerns that he/she had regarding the company’s operations” but “[d]espite being aware of the ongoing SEC investigation, [the individual] did not provide the letter to the SEC or other regulators.”
The outside counsel subsequently shared the letter with the SEC who then contacted the individual for a meeting. Thus, while the individual did cooperate with the SEC’s investigation and provide information, because the SEC reached out to him/her, their disclosure is considered “voluntary.”
On January 19, the SEC awarded $18 million to three whistleblowers who separately made disclosures which contributed to the success of the same enforcement action. The whistleblowers’ voluntary disclosures led to millions of dollars being returned to harmed investors.
Overall, the SEC has awarded more than $1.3 billion to over 300 whistleblowers. According to the agency, “Enforcement actions brought using information from meritorious whistleblowers have resulted in orders for more than $6.3 billion in total monetary sanctions, including more than $4.0 billion in disgorgement of ill-gotten gains and interest, of which more than $1.5 billion has been, or is scheduled to be, returned to harmed investors.”
Whistleblowers considering blowing the whistle to the SEC should first consult an experienced SEC whistleblower attorney to ensure they are fully protected and qualify for the largest possible award.
Geoff Schweller also contributed to this article.