The Securities and Exchange Commission (SEC) has a Whistleblower Program, which encourages insiders to provide tips regarding wrongdoing. Qualified whistleblowers may receive anywhere from ten to 30 percent of the sanctions collected from successful enforcement actions as a result of their disclosure. The rest is returned to harmed investors or the U.S. Treasury.
Last November, the SEC announced that one such whistleblower received a staggering $20 million award as a result of their tip. Others, however, were denied awards. Here’s why.
Although there are few specific details as to the nature of the whistleblower case, the SEC announced that the claimant voluntarily provided original information to the SEC. The information led to successful and efficient enforcement. Even though the claimant delayed reporting for over two years, and had been involved in the underlying conduct, the whistleblower still received $20 million as their share. The SEC has the power to reduce or deny awards, but in this case, they deemed the $20 million an appropriate reward.
Several other claimants were denied rewards, which provides insight into why a claimant may not be successful. One claimant’s award was denied because their information did not lead to a successful enforcement action. They also submitted a second set of information, just hours before the action was initiated. When the claimant submitted a reconsideration request, they argued that they sought legal representation but their lawyer had a conflict of interest—potentially due to representing the entity under investigation. The SEC did not change their determination.
Another claimant’s award was denied because their four tips did not lead to a successful enforcement action, since the information was not related to the charges. When this claimant submitted their own reconsideration request, the SEC reiterated their findings.
When you’re ready to blow the whistle, a trusted whistleblower attorney at Kardell Law Group can help you navigate the process. Contact us today for a consultation.