June 3, 2020

June 03, 2020

Subscribe to Latest Legal News and Analysis

June 02, 2020

Subscribe to Latest Legal News and Analysis

June 01, 2020

Subscribe to Latest Legal News and Analysis

Securities Fraud Whistleblowers Rewarded for Assisting SEC Investigations

Yesterday, the Securities and Exchange Commission (SEC) announced two whistleblower awards to two separate whistleblowers for their efforts in providing information that led to enforcement actions.

The first whistleblower, who received a $277,000 award, alerted the SEC to a fraudulent scheme preying on retail investors. The SEC applied the criteria in Rule 21F-6 of the Securities Exchange Act to determine whether to give an award. In granting the whistleblower award the SEC determined that:

(1) Claimant reported significant information to the Commission, alerting the staff to an ongoing fraudulent scheme; (2) Claimant’s information saved Commission time and resources; (3) Claimant’s information bears a close nexus to the charges brought by the Commission, as well as by the USAO; (4) Claimant assisted staff in the form of an in-person interview; (5) there are significant law enforcement interests here, as Claimant’s information helped the agency shut down an ongoing fraudulent scheme that was preying on retail investors; and (6) there have been low collections to date.

SEC Order 34-88015

The second whistleblower, a harmed investor, provided vital information to the Commission that resulted in the recovery of victims’ assets. This whistleblower received a $45,000 award.  Applying the Rule 21F-6 criteria in granting the award the SEC determined the award appropriate based on the following:

(1) Claimant was a harmed investor who lost money in the scheme; (2) Claimant provided new, critical, time-sensitive information that allowed staff to recover assets and return them to harmed investors; (3) Claimant’s information saved the staff time and resources in conducting its investigation; (4) Claimant helped the Commission shut down a fraudulent scheme targeting retail investors; (5) Claimant provided continuing assistance; (6) collections from the defendants of the monetary sanctions ordered were low.

SEC Order 34-88014

SEC whistleblowers who voluntarily provide the Commission with original information that leads to an enforcement action resulting in monetary sanctions exceeding $1,000,000 are eligible for financial awards from the SEC Whistleblower Office. The range for SEC whistleblower awards is between 10 and 30 percent of the money collected from wrongdoers.

Under the Dodd-Frank Act, the SEC is required to protect the confidentiality of whistleblowers and cannot disclose any information that may reveal their identities. Both whistleblowers in these actions chose to remain anonymous.

Whistleblowers who report securities frauds under the Securities and Exchange Act, the Commodity Exchange Act, and the Foreign Corrupt Practices Act (FCPA) are permitted to file reward claims with the SEC anonymously.

Since issuing its first award in 2012, the SEC has paid approximately $387 million to 72 investors.

Read the SEC press release: SEC Awards Whistleblowers Whose Information Helped Stop Fraud

Ben Kostyack contributed to this article

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.


About this Author

Mary Jane Wilmoth KKC  managing partner  whistleblower protection, environmental and nuclear industry whistleblowers, Qui Tam/False Claims whistleblowers.
Managing Partner

Mary Jane Wilmoth is the firm’s managing partner, and works closely with the partners at KKC, specializing in environmental and nuclear whistleblower protection, Qui Tam/False Claims litigation, and labor and employment law. She joined the firm in 1992, and works on cases and hearings that involve complex nuclear and environmental regulations. In her efforts to assure such safeguards are upheld in the American workplace, she has helped to strengthen whistleblower rights in licensing and enforcement proceedings with the Nuclear Regulatory Commission. She has also defended whistleblowers at...