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Recent Whistleblower Case Shows Potential for Reduction in Monetary Awards

On February 28, the U.S. Securities and Exchange Commission (SEC) awarded a whistleblower 20 percent of the sanctions paid in association with an enforcement action brought forth as a result of unique information provided by that whistleblower. In this case, the SEC clarified that the whistleblower’s own culpability in some of the securities violations at issue in the case resulted in a lower award than the individual might have received had he or she not had any responsibility in those violations.

There is not much detail provided in the SEC’s order, as is typical of these whistleblower awards. The agency purposefully is as vague as possible in its announcements so as not to accidentally expose the identity of its whistleblowers.

However, it is interesting that the SEC felt the need to point out the whistleblower could have earned more had the person not taken part in the securities violations. Typically, whistleblowers who are convicted of crimes related to misconduct are ineligible to earn awards under the whistleblower program. However, the SEC may issue awards to whistleblowers allowed in misconduct, but who were not criminally charged. The agency can even offer awards to whistleblowers who were charged with civil violations.

Culpability and delayed reports by a whistleblower are two of the main factors the SEC considers in determining if it will lower the amount of a monetary award. In contrast, factors that could increase an award’s size include the following:

• Assistance provided by a whistleblower during an investigation
• Significance of information provided by the whistleblower
• Law enforcement’s interest in the reported information
• The whistleblower’s participation in compliance systems that already exist internally

To learn more about the factors affecting the size of a potential SEC whistleblower award, meet with an experienced Dallas lawyer at Whistleblower Law for Managers.


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