SEC Awards Whistleblower $30 Million

Author: Marta Moakley, XpertHR Legal Editor

September 26, 2014

The Securities and Exchange Commission (SEC) announced this week an expected $30 million award to an individual who provided key information on ongoing fraud. This award represents the SEC's largest-ever whistleblower award under its whistleblower program.

The award marks the fourth to a whistleblower living in a foreign country. In a press release, Sean McKessy, Chief of the SEC's Office of the Whistleblower, stressed the importance of the whistleblower's location because "it shows the international breadth of our whistleblower program as we effectively utilize valuable tips from anyone, anywhere to bring wrongdoers to justice." By announcing this award, McKessy hopes that whistleblowers from around the world "should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws."

The identity of the whistleblower was not announced by the SEC, in keeping with its procedures. The SEC does not provide information regarding the target of a particular enforcement action, the nature of the action or the actual percentage of the monetary sanctions awarded to the whistleblower. All of these steps are designed to maintain the whistleblower's anonymity and, therefore, protect the informant from retaliation.

Only those individuals with original information that results in an SEC enforcement action with sanctions exceeding $1 million will be eligible for an award under the whistleblower program. Larger awards may denote the provision of information that would have been otherwise extremely difficult to find, investigate or prosecute without assistance from an insider. Andrew Ceresney, Director of the SEC's Division of Enforcement, has confirmed that the whistleblower's information concerned an ongoing fraud that would have been very difficult to detect. However, the amount of the award was reduced because the tipster delayed reporting the misconduct to the SEC.

This week's award more than doubles the SEC's previous high of $14 million. Although the awards announced by the SEC have been in the single digits on any given year since the program's 2012 inception, and represent a small portion of the estimated thousands of tips received by the agency, the SEC maintains that the program will continue its current trend of yearly growth.