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SEC Enforcement Actions; $2.1 Million Whistleblower Award

SEC Enforcement Actions; $2.1 Million Whistleblower Award

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Former Company Insider’s Voluntarily-Provided Information Strongly Supported the Findings in the Underlying Actions

On April 12, 2018, the Securities and Exchange Commission announced a whistleblower award of more than $2.1 million to a former company insider whose information led to multiple successful enforcement actions.

The whistleblower’s information strongly supported the findings in the underlying actions and the whistleblower provided ongoing assistance to SEC staff during the investigation.

According to the Order Determining Whistleblower Award Claim:

The recommendation of the CRS [Claims Review Staff] with respect to the Covered Actions is adopted. We find that the record demonstrates that the Claimant voluntarily provided original information to the Commission that led to the successful enforcement of the Covered Actions pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78u-6(b)(1), and Rule 21F-3(a) thereunder, 17 C.F.R. § 240.21F-3(a).

Turning to the award amount, we have applied the award criteria identified in Rule 21F-6 of the Exchange Act to the specific facts and circumstances here.2 In doing so, we find that the CRS’s proposed award determination is appropriate. We positively assessed the facts that the Claimant was a former company insider whose information strongly supported the findings in the Covered Actions and who thereafter continued to provide ongoing helpful assistance to the staff during the Commission’s investigation.

Since issuing its first award in 2012, the SEC has awarded more than $266 million to 55 individuals under the whistleblower program.  In that time, almost $1.5 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received from whistleblowers, including more than $740 million in disgorgement of ill-gotten gains and interest, the majority of which has been or is scheduled to be returned to harmed investors.

All whistleblower payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. 

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

Do You Qualify as an SEC Whistleblower?

If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.

Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.

Can You Submit Information Anonymously to the SEC?

Yes, however, if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.

What Kind of Wrongful Conduct Is of Interest to the SEC?

Examples of the kind of conduct about which the SEC is interested include:

  • Ponzi scheme, Pyramid Scheme, or a High-Yield Investment Program
  • Theft or misappropriation of funds or securities
  • Manipulation of a security’s price or volume
  • Insider trading
  • Fraudulent or unregistered securities offering
  • False or misleading statements about a company (including false or misleading SEC reports or financial statements)
  • Abusive naked short selling
  • Bribery of, or improper payments to, foreign officials
  • Fraudulent conduct associated with municipal securities transactions or public pension plans
  • Other fraudulent conduct involving securities
SEC Investigations and The Federal Securities Laws

The SEC conducts investigations into possible violations of the federal securities laws. Again, the more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to SEC investigative staff for further follow-up or investigation. For example, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be assigned to SEC Enforcement staff for investigation.

It is important to keep in mind that the SEC does not have jurisdiction to take action on information that is outside the scope or coverage of the federal securities laws. The SEC may, in appropriate circumstances, refer your matter to another regulatory or law enforcement agency.

Do You Have Questions or Concerns About Providing Information to the SEC About Securities Fraud?

If so, please know that Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing.  Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose fraud committed against the United States government.

If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right or sending an e-mail to [email protected].  If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.

For additional SEC Whistleblower Program information, please see Frequently Asked QuestionsSubmit a TipClaim an AwardFinal Orders, and Section 21F of the Securities Exchange Act of 1934 (Securities Whistleblower Incentives and Protection).

Source: SEC.gov.

Kehoe Law Firm, P.C.