SEC whistleblower bounty program uncovers $14m award
Earlier this month, the SEC awarded $14 million to an anonymous whistleblower who sent a tip about securities fraud that helped the Commission take enforcement action and recover investment funds. The case was the largest amount awarded since the launch of the U.S. Securities and Exchange Commission’s (SEC) whistleblower bounty program, which was created to help eliminate illegal and fraudulent financial conduct and to promote greater corporate compliance with federal securities laws.
Section 922 of the Dodd-Frank Act (DFA) established new whistleblower incentives and protections, including awards to individuals “who provide the SEC with original information about securities fraud that leads to the successful SEC enforcement action resulting in monetary sanctions over $1 million.” This is the third award the Commission has handed out since the program began; in 2012, the agency awarded $50,000 to the first whistleblower and more than $25,000 to three whistleblowers later that year. Awards can amount up to 30% of the recovered funds and protects whistleblowers from retaliation from employers. The agency stated that a claims staff review determined the $14 million award based on the monetary sanctions that had already been collected, the significance of the information provided by the whistleblower and the assistance the tip offered in accelerating enforcement action. SEC officials say they hope the promise of cash awards will encourage more individuals with fraud information to come forward in the future.
The agency also wants prospective whistleblowers to recognize the steps it takes to protect their anonymity in these types of cases. Several federal and state laws protect whistleblowers against retaliation from employers. However, recent developments in three of them – the Dodd-Frank Act, the Sarbanes-Oxley Act and the Foreign Corrupt Practices Act – have altered the way certain anti-retaliation provisions are being interpreted. Click here to read more about these changes and other updates.
In light of the latest DFA award and the recent changes to statutes affecting whistleblower protections, employers should be sure to conduct thorough reviews of their corporate internal reporting procedures, making sure their policies are supported by employee awareness programs, deliver prompt response from senior management and can be managed effectively to avoid outside involvement from the SEC and other federal agencies.
About the Author
Jennifer Sharkey is a Senior Vice President at William Gallagher Associates and Leader of the firm’s ExecutiveRisk Practice. She is responsible for the strategic and tactical leadership of this practice by providing consulting, marketing and negotiation expertise on Directors’ & Officers’ Liability, General Partnership Liability, Private Equity/VCAP, Fiduciary Liability, Fidelity, Kidnap/Ransom & Extortion, Employment Practices Liability and Professional Errors & Omissions Liability.