On August 29, 2019, the Securities and Exchange Commission awarded more than $1.8 million to a whistleblower who tipped the SEC to overseas violations of the US securities laws. Securities Exchange Act of 1934 Rel. No. 86803 (August 29, 2019). This award illustrates that the SEC’s highly-regarded whistleblower program can provide major monetary rewards for tips relating to securities violations taking place in foreign countries, not only violations occurring in the United States.
The SEC whistleblower program ensures full anonymity to whistleblowers who prefer to remain unidentified. Like all SEC whistleblower awards, the August 29 order does not identify the whistleblower, the violator, the reported violations, or the full amount of the SEC’s recovery. However, the order makes clear that the whistleblower’s tip identified “misconduct committed overseas” and that the whistleblower provided “stellar information and ongoing assistance” in support of the enforcement action. The order also indicates that the SEC believed a significant award was appropriate because the whistleblower’s tip “caused the Enforcement staff to open an investigation” and the whistleblower assisted the investigation by reviewing documents, providing sworn testimony, and encouraging other witnesses to cooperate. Another factor highlighted in the order is that because the violations occurred abroad, it would have been “difficult or impossible” to identify and prove the violations without the whistleblower’s tip.
Two factors noted in the order are particularly relevant to potential whistleblowers considering when and how to disclose securities law violations. First, the SEC’s order emphasizes that in this case the whistleblower’s tip was “the first information on the . . . misconduct that the Commission received.” The chance of receiving an award is far greater if the whistleblower acts quickly and is the first to bring the information to the SEC.
Second, the order notes that the whistleblower “internally reported the conduct,” i.e., reported also to his employer. Although a whistleblower is protected by the Dodd-Frank Act from employer retaliation only if the whistleblower previously disclosed the misconduct to the SEC, see Digital Realty Trust v. Somers (Sup. Ct, 2018), the SEC encourages whistleblowers to also make disclosure to their employers and considers internal reporting to be a positive factor when evaluating potential awards.
This is the fifth order issued by the SEC so far in 2019 approving monetary awards to whistleblowers. The smallest award in 2019 has been $500,000, and the largest to a single individual in 2019 has been $37 million. In total, the SEC has awarded more than $387 million to 66 individuals since the whistleblower awards program was created.
Whistleblower Aid, Inc.
The foregoing is provided by Whistleblower Aid, for general information purposes and is not intended to be, and should not be taken as, legal advice.
See https://whistlebloweraid.org/contact/#whistleblower-contact for guidance on how to contact Whistleblower Aid.
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