There are trends in the SEC Whistleblower awards distributed. We will discuss here the commonalities among the tips or complaints that were submitted by successful whistleblowers.
In examining the awards for those individuals who courageously reported fraud to the government, two specific commonalities emerged. First, the misconduct was relatively current or ongoing. Second, the information provided was specific. In other words, the whistleblower:
- identified particular individuals involved in the fraud,
- pointed to specific documents that supported their allegations or explained where such documents could be located, or
- identified specific financial transactions that evidenced the fraud.
Original Information to SEC Investigation
Roughly one-half of the people who have received SEC whistleblower awards provided original information that caused enforcement staff to open an investigation.
The other half of the people who received SEC Whistleblower awards provided original information that significantly contributed to an existing investigation. In assessing whether information significantly contributed to an enforcement action, the SEC considers specific factors. The factors include:
- whether the information allowed the SEC to bring the action in significantly less time or with fewer resources,
- additional successful claims, or
- successful claims against additional individuals or entities.
SEC Whistleblower Rewards to Current/Former Employees
There is no requirement under that an individual must be a current or former employee to be eligible for an award. However, to date, almost half of the SEC whistleblower award recipients were current or former employees of the company on which they reported information of wrongdoing.
Additionally, of the award recipients who were current or former employees, approximately 80% raised their concerns internally to their supervisors or compliance personnel, or understood that their supervisor or relevant compliance personnel knew of the violations before reporting the wrongdoing to the SEC.
The remaining SEC award recipients obtained their information because they were either:
- investors who had been victims of the fraud,
- professionals working in a related industry, or
- had a personal relationship with the alleged wrongdoer.
20% SEC Whistleblower Rewards Were Anonymous
A whistleblower may choose to submit his or her tip anonymously to the SEC, if represented by counsel. Approximately 20% of the individuals who received awards submitted their information anonymously to the SEC through counsel.
During the course of the investigation many of those whistleblowers identified themselves to the SEC. Additionally, whistleblowers must identify themselves when they apply for an SEC whistleblower award. This allwos the SEC to assess whether they satisfy the criteria for receiving an award. Even at the time of an SEC award, however, their identity is not made available to the public.
SEC Whistleblower Reward Trend: Fraud in Financial Services Industries
Several of the cases in which a whistleblower received an SEC whistblower award concerned firms involved in the financial services industry. Some of the cases involved broker-dealers or financial advisers. A number of the SEC award recipients reported information to the SEC concerning suspected Ponzi-like schemes. Other award recipients provided tips to the SEC relating to false or misleading statements in a company’s offering memorandum or marketing materials, and false pricing information, among other types of misconduct.
SEC Whistleblower Rewards for Joint Filers
Individuals are permitted to jointly submit a tip to the SEC. In fact, four of the cases in which an award payment was made involved two or more whistleblowers jointly submitting information and materials to the SEC. In these cases, each whistleblower received a percentage of the amounts collected in the SEC enforcement action or related action. The SEC whistleblower awards were based on his or her level of contribution and assistance to the case.
SEC Whistleblower Rewards For Related Actions
Individuals who provide information that leads to successful SEC actions resulting in monetary judgments over $1 million may be eligible to receive an award if the same information led to a related action, such as a parallel criminal prosecution. Seven of the award recipients have received payments based on collections made in other actions.
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