On May 5, 2023, the U.S. Securities and Exchange Commission (SEC) announced it awarded an undisclosed whistleblower almost $279 million for their assistance in an investigation that led to three successful enforcement actions by the regulator and two related actions. This is the highest award in the SEC’s whistleblower program’s history.
Whistleblower’s Voluntary Disclosure and Full Cooperation Led to Historic Award
The SEC’s Order Determining Whistleblower Award Claims, Exchange Act Rel No. 97438 (May 5, 2023), indicates that there were three whistleblowers involved in the Commission’s investigation; however, only one was awarded the record award.
The Order goes on to state that the unidentified whistleblower voluntarily provided “significant” information that expanded the investigation, saved the regulator significant time and resources, and provided substantial, ongoing assistance, including written submissions, communications, and interviews. The whistleblower’s cooperation also resulted in an increased award by satisfying the requirements of Rules 21F-3(b)(1)-(2) of the Securities Exchange Act of 1934, garnering an award for the two related actions which were based in part on the same information.
The two other whistleblowers were not eligible for an award in the enforcement action, or the related actions due, in part, to the failure to voluntarily provide the information directly to the SEC.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, noted that the award incentivizes whistleblowers to come forward with accurate information about potential securities violations and praised the SEC’s whistleblower program, which has resulted in disgorgement totaling over $4 billion in ill-gotten gains and interest. In line with agency policy and the Dodd-Frank Act, neither the enforcement action nor the identities of the whistleblowers were disclosed.
Whistleblowers whose timely and credible information lead to successful civil enforcement actions are eligible to receive anywhere from 10-30% of the fines collected as a reward, assuming the SEC collects more than $1 million.
The SEC’s push for voluntary and full, complete disclosure from whistleblowers syncs up with other federal regulators and law enforcement agencies renewed and revamped policies on incentivizing cooperation with the government for corporate misconduct.
With record-setting fines being levied in the billions of dollars, coupled with the substantial whistleblower incentives being offered by the SEC, it is more critical than ever for companies to ensure that they have effective corporate compliance programs, including the adoption of internal helplines and reporting systems.
Buchanan’s white collar defense and corporate compliance practice groups have extensive expertise in assisting clients with whistleblower concerns as well as the adoption and implementation of corporate compliance programs and are available to provide guidance and assistance in these important areas.