SEC Whistleblowers Receive $12 Million for Blowing Whistle on Registered Broker-Dealer

On March 31, the U.S. Securities and Exchange Commission (SEC) granted whistleblower awards to two whistleblowers who provided information that contributed to the success of the same enforcement action. One whistleblower received $9 million while the second received $3 million.

Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds collected in the enforcement action. The SEC weighs a number of factors, including the significance of the information and the timeliness of the disclosure, in determining the exact percentage to award a whistleblower.

The whistleblowers’ disclosures contributed to settled public administrative proceedings against a registered broker-dealer. According to the SEC, the first whistleblower’s tip “was the initial source of the underlying investigation” while the second whistleblower “provided important information as a percipient witness… with factual details on those topics that went beyond what Claimant 1 had been able to provide.”

“Whistleblowers play a critical 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. “The information and assistance provided by these two whistleblowers in helping to identify complex wrongdoing demonstrates the importance of the whistleblower program to the SEC’s enforcement efforts.”

Both whistleblowers provided the SEC with ongoing assistance after their initial disclosures, including participating in interviews, providing documents, and identifying witnesses. According to the award order, “the Commission used information Claimant 1 provided to devise an investigative plan and to craft its initial document requests” and the information provided by the second whistleblower “gave the staff a more complete picture.”

The SEC notes that it issued a larger award to the first whistleblower because “Claimant 1’s information was more important to the investigation because Claimant 1’s information was received by the Commission several years before Claimant 2’s information.” 

The SEC also notes that the second whistleblower’s award was decreased “due to unreasonable reporting delay.” According to the award order, “in contrast to Claimant 1, who persistently alerted the Commission for a number of years before the investigation was opened, Claimant 2 delayed reporting to the Commission for several years.”

Since the SEC Whistleblower Program was established in 2010 it has issued more than $1.3 billion in whistleblower awards 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.”

Geoff Schweller also contributed to this article.