The Securities and Exchange Commission (SEC) has announced the largest-ever whistleblower award to the tune of $279 million. This is more than double the prior top amount of $114 million.
Whistleblower awards are given to individuals who tip off the SEC in regard to infractions perpetuated by a financial services firm. Thus an individual is incentivized to spill details on malfeasance if a company is flouting securities law. The SEC does not identify individuals who receive a whistleblowers award, privacy requirements shield an individual from any retributions from their actions.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said the awards incentivize individuals to come forward and reveal accurate information on potential securities law violations. He said the success of the program directly benefits investors adding that whistleblowers have led to enforcement actions requiring scofflaws to return more than $4 billion in “ill-gotten gains.”
“As this award shows, there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations.”
The assistance of the unknown individual, which included multiple interviews and written submissions, was critical to the success of the enforcement action, explained Creola Kelly, Chief of the SEC’s Office of the Whistleblower.
“While the whistleblower’s information did not prompt the opening of the Commission’s investigation, their information expanded the scope of [the] misconduct charged.”
Payments to whistleblowers are made out of an investor protection fund established by Congress, which is financed entirely through monetary sanctions paid to the SEC by securities law violators. No funds from harmed investors is used to pay for the awards. Whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million.
