$22 million whistleblower award 2nd largest in SEC history

September 7, 2016

metal WhistleThe Securities and Exchange Commission has awarded $22 million to a person who reported a company’s misconduct, the second-highest amount in the history of the agency’s whistleblower program.

The unidentified individual provided original information that led to a successful enforcement action, according to an Aug. 30 SEC order.

The award is second only to a $30 million whistleblower bounty the SEC issued in September 2014.

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C.A. § 78u-6, which mandated the SEC’s whistleblower program, says the agency must protect the whistleblower’s confidentiality and cannot disclose information that could lead to the person’s identification.

The order says the SEC’s claims review staff issued a preliminary determination July 7 recommending the award, noting that the individual voluntarily provided the whistleblower tip.

The whistleblower notified the SEC roughly a week later that he or she would not contest the decision.

The $22 million represents an undisclosed percentage of the monetary sanctions the SEC recovered in its related enforcement action against the company, which also has not been identified.

Although the SEC can disclose only limited details about the investigation, it said in an Aug. 30 statement that the person provided a “detailed tip and extensive assistance” that helped the agency “halt a well-hidden fraud at the company where the whistleblower worked.”

Whistleblower milestones

The recent award continues a number of milestone events under the SEC’s whistleblower program.

In June the agency announced what was then the second-highest award, $17 million, to a former company employee whose tip aided the SEC’s investigation and eventual enforcement action.

On May 17 the SEC approved a whistleblower award of between $5 million to $6 million to an unnamed individual, which was the third highest amount issued at that time.

In the first case of its kind, the SEC in April 2015 announced a whistleblower protection action against a company that deterred employees from reporting misconduct to the agency.

The SEC brought its first-ever whistleblower anti-retaliation case in June 2014. The agency alleged New York-based hedge fund Paradigm Capital Management and its owner, Candace King Weir, engaged in prohibited trading activity transactions and retaliated against an employee who reported the transactions to the SEC.

In April 2015 the commission said it issued the maximum whistleblower award amount of 30 percent of the penalties collected in connection with the Paradigm action.

With the latest award, the SEC said, it has issued more than $100 million since the inception of the whistleblower program in 2011.

Whistleblower Award Proceeding, S.E.C. Release No. 78719, 2016 WL 4524431 (Aug. 30, 2016).