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Important Takeaways from the Most Recent SEC Whistleblower Award

The U.S. Securities and Exchange Commission (SEC) recently issued an award resolving the claims of a pair of whistleblowers based on the same action filed against the same entities. However, while one of these whistleblowers got a $3.5 million payout, the other received nothing. Why exactly was this?

First, it is important to consider the fact that the SEC denies significantly more claims than it grants. Although the program has distributed approximately $135 million to 37 whistleblowers since beginning its award program in 2011, there are many more complaints for which the agency does not grant awards of any kind.

Missed deadline, lack of enforceable action to blame for denial

In this particular case, the SEC denied the second whistleblower’s claim for two main reasons. First, it was filed late. During the appeal process, the whistleblower argued the process for filing the claim and ultimately obtaining an award was unclear, and that the SEC should provide greater instruction to whistleblowers regarding the claims process. The agency disagreed, stating that its Notice of Covered Action and various other rules offer plenty of “constructive notice.”

The second whistleblower also did not provide information that directly resulted in the covered action’s successful enforcement. The first whistleblower, however, did submit information that was both credible and highly specific, and that played a key role in making the enforcement action possible. In fact, providing information that does not lead to a successful enforcement action is the most common reason why the SEC denies awards.

When whistleblowers do file their claims properly and provide information that leads to a successful enforcement action, they stand to earn a significant amount of money in rewards. To learn more about your options if you are aware of wrongdoing within a business or government agency, speak with a knowledgeable Dallas attorney at Whistleblower Law for Managers.


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