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SEC Awards More Than One Million Dollars to Compliance Officer

On April 22, 2015, the SEC announced an award of between $1.4 million and $1.6 million to a compliance officer who provided original information to the SEC that led to the successful enforcement of a covered action. Exchange Act Rel. 74781 (Apr. 22, 2015). The Dodd-Frank Whistleblower rules generally exclude information that is obtained by an “employee whose principal duties involve compliance or internal audit responsibilities … .” 17 C.F.R. § 240.21F-4(b)(4)(iii)(B). This rule would ordinarily prevent those employees from qualifying as a Whistleblower. An exception applies, however, when the employee has “a reasonable basis to believe that disclosure of the information to the Commission is necessary to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or properly of the entity or investors … .” 17 C.F.R. § 240.21F-4(b)(4)(v)(A).

The SEC determined this exception was applicable here. According to Andrew Ceresney, Director of the SEC’s Division of Enforcement, “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.” Press Rel. 2015-73. Despite the limitation on compliance and audit employees to qualify as Whistleblowers, this is the second time the SEC has relied on the exception to make an award to an employee with compliance or audit responsibilities. Last August, the SEC announced an award of more than $300,000 to an employee who performed compliance and audit functions. Press Rel. 2014-180.

© 2022 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume V, Number 113
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About this Author

Mary P. Hansen, White Collar Criminal Defense Attorney, Drinker Biddle Law Firm
Partner

Mary Hansen is a partner on the firm’s White Collar Criminal Defense & Corporate Investigations team, where she focuses her practice on defending clients in regulatory investigations as well as white collar criminal proceedings in the securities industry.  She also assists clients with internal investigations and compliance and prevention strategies.

Prior to joining the firm, Mary was an Assistant Director of the U.S. Securities & Exchange Commission’s Division of Enforcement, where she was a member of the division’s Market Abuse and...

215-988-3317
William Carr Corporate Litigation Attorney Faegre
Partner

William L. Carr is a member of the Governance and Corporate Law Disputes Team within the firm’s Litigation Group. William focuses his practice on securities litigation and accountants’ defense, internal investigations, white collar criminal defense and complex civil litigation. William has represented clients in a number of venues, including in state and federal courts and before federal grand juries and various federal agencies.

William also maintains the SECurities Law Perspectives blog, which provides reports, discussions and analyses on...

215-988-2857
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