The Securities and Exchange Commission (SEC) announced a $14 million award to a whistleblower whose tip led to an enforcement action. The whistleblower, who remains anonymous, gave original information to the SEC that enabled the agency to complete its investigation and enforce the matter in less than six months from receiving the tip. This is largest award in the whistleblower programs two-year history.
The significance of the award
The first SEC Whistleblower Program award was paid out in August 2012 — only $50,000. Earlier this year, payments of more than $25,000 were made to three whistleblowers. The enforcement actions that led to these first awards involved small Ponzi-type schemes that did not have any money to pay the awards. If there is no money collected by the SEC, there is no money to award the whistleblower. Assuming that the SEC is paying the tipster in this case 10 percent of the amount collected, the total fine is $140 million.
This is the type of award that makes securities businesses nervous because it may inspire additional whistleblowers.
How to blow your SEC whistle
The SEC Whistleblower Program provides monetary incentives to people who volunteer original information about possible violations of federal securities laws to the SEC. The award amount is 10 to 30 percent of the monetary sanctions collected by the agency in actions initiated by the SEC or other regulatory and law enforcement authorities from the information provided in the tip. The information must be given to the SEC voluntarily before it is requested by the agency, Congress or some other law enforcement agency. The tip must be derived from your independent knowledge or independent analysis.
If you submitted a report of misconduct to the SEC before July 21, 2010, the day the Dodd-Frank Act became effective, you are not eligible for an award. According to the SEC rules, your tip may be submitted anonymously. However, an attorney must represent you.
Utilizing a Dallas whistleblower attorney, who understands the bureaucratic challenges of filing a tip with the SEC and other agencies, may significantly enhance the success of your communications with the SEC. Contact our office to learn more.