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SEC Awards $3.4 Million to Whistleblower, Denies Other Claimants
Friday, May 31, 2024

On May 31, the U.S. Securities and Exchange Commission (SEC) issued a final award order granting an award of $3.4 million to one whistleblower and denying the award applications of four other claimants.

Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are eligible to receive monetary awards of 10-30% of the funds collected in the action connected to their disclosure.

The SEC determined that the awarded whistleblower (Claimant 1) qualified for an award. The Commission explains that, while the investigation which resulted in the enforcement action was opened in response to a referral from the Department of Examinations, “during the course of the investigation, Claimant 1 met with Enforcement staff… and provided new, helpful information that substantially advanced the investigation.”

In determining the exact percentage to award a whistleblower, the SEC weighs a number of factors. In this case, the SEC determined the percentage due to the fact that “Claimant 1 has no negative factors” and “based on the significance of the information provided, the assistance provided, the hardship he/she suffered as a result of his/her whistleblowing activities, and the high law enforcement interests in this matter.”

In contrast the SEC determined that four other individuals who submitted award claims for the enforcement action (Claimants 3, 4, 5 and 7) did not qualify for awards and denied their claims.

According to the SEC, “the Enforcement staff responsible for the Covered Action never reviewed or received information from Claimants 3 and 4. As such, Claimants 3 and 4 did not submit information that ‘led to’ the success of the Covered Action.”

In the case of Claimant 5, the SEC explains that “While Enforcement staff responsible for the investigation received and reviewed Claimant 5’s second TCR more than one year before opening the investigation, the staff closed the tip and did not use it in any way. Finally, staff received Claimant 5’s third tip during the investigation, but the tip did not contain any new or helpful information.”

Lastly, Claimant 7 argued that they should be considered a “joint” whistleblower alongside Claimant 1 and thus qualify for a share of the award. The SEC determined that Claimant and 7 and 1 were not joint whistleblowers based on this reasoning:

“The touchstone for determining whether two individuals acted as joint whistleblowers turns on how the individuals presented themselves when providing the information to the Commission. Here, the record supports the conclusion that Claimant 1 and Claimant 7 did not present themselves to Commission staff as joint whistleblowers. Only Claimant 1, and not Claimant 7, attended the [Redacted] meeting with Enforcement staff and provided useful information that advanced the investigation. Claimant 1, not Claimant 7, received the subpoena from Enforcement staff, and Claimant 1, not Claimant 7, provided helpful documents in response. While Claimant 1 and Claimant 7 may have copied each other at times on their correspondence with Commission staff, they did not represent themselves as a unit or a team.”

Since the SEC Whistleblower Program was established with the passage of the Dodd-Frank Act in 2010, the SEC has granted more than $1.9 billion in whistleblower awards.

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