In late July, the Securities and Exchange Commission (SEC) announced it would pay $1.7 million to a whistleblower who provided important information to the agency. This was despite the fact that the whistleblower had some culpability in the fraud, delayed the reporting of that fraud to the SEC and failed to comply with a Dodd-Frank Act rule that requires all whistleblowers to submit inside information in writing in some circumstances.
The case is important because it is an example of just how far courts will go to report whistleblowers, even if those whistleblowers are partially responsible for the wrongdoing they report.
The SEC wrote in its order that in determining an appropriate award percentage for the whistleblower, it considered the fact that the whistleblower had an unreasonable delay and was partially responsible. However, the SEC would have otherwise had a very difficult time uncovering this serious incidence of multi-year fraud, and the delay was at least partially mitigated because the whistleblower alerted the SEC to the fraud before the whistleblower and its accompanying protections were established by Dodd-Frank.
Therefore, it is possible the whistleblower could have earned more money had he acted more quickly, but the agency was willing to look past his culpability and delay because of the quality of information provided and the serious nature of the wrongdoing it uncovered.
Culpable whistleblowers might not receive money in the future
There are some potential changes on the horizon for culpable whistleblowers. In June, the House of Representatives passed the Financial CHOICE Act, which would prohibit culpable whistleblowers from being granted any type of financial award under Dodd-Frank.
The SEC’s whistleblower program overall, however, does not appear to be in any danger under the Trump administration.
For more information and guidance on how to proceed with an SEC whistleblower claim, contact an experienced Dallas attorney at Whistleblower Law for Managers.