More Than $2.2 Million Awarded to SEC Whistleblower Who Initially Reported Information to Another Federal Agency 

On April 5, 2018, the Securities and Exchange Commission announced a whistleblower award of more than $2.2 million to a former company insider whose tips helped the agency open an investigation that led to an enforcement action.

The whistleblower first reported the information to another federal agency and later provided the same information to the SEC.

According to the SEC, this is the first award paid under the “safe harbor” of Exchange Act Rule 21F-4(b)(7), which provides that if a whistleblower submits information to another federal agency and submits the same information to the SEC within 120 days, then the SEC will treat the information as though it had been submitted to the SEC at the same time that it was submitted to the other agency.

The SEC’s “Order Determining Whistleblower Award Claim” stated:

Under Rule 21F-4(b)(7), if an individual submits his or her tip to another federal agency, then in considering an award application from that individual, the [SEC] will treat the information as though it had been submitted to the [SEC] directly from the individual at the same time that it was submitted to the other agency, provided that the individual submitted that same information to the [SEC] no later than 120 days after the individual first went to the other government agency. In this way, Rule 21F- 4(b)(7) operates as a 120-day safe harbor, assuring an individual who voluntarily reports misconduct to another agency first that he or she will be deemed for award purposes to have reported directly to the [SEC] at the same time that the individual reported to the other federal agency.[] Thus, the other agency’s use of the information in a referral that causes the staff to open an investigation is credited directly to the whistleblower for purposes of making an award determination, including the “led to” standard under Exchange Act Rule 21F-4(c).

Applying Rule 21F-4(b)(7) to the facts in this matter, we find that the Claimant is deemed to be have been a whistleblower who caused the opening of the investigation by providing original information to the [SEC]. The relevant facts here are clear: The Claimant voluntarily reported information to a federal agency covered by the rule, that federal agency in turn made a referral to the [SEC] based on the Claimant’s information, the Enforcement staff then promptly responded to the referral by opening the investigation that resulted in the Covered Action, and the Claimant within 120 days of reporting to the other agency (albeit after the [SEC’s] investigation was opened) provided the same information to the Commission in accordance with the procedures specified in Exchange Act Rule 21F-9. Based on the foregoing, we find that the Claimant satisfies the Rule 21F-4(b)(7) safe-harbor provision and, thus, in making an award to the Claimant for the Covered Action we have treated the Claimant’s submission to the [SEC] as though it had been made on the date that the Claimant provided that same information to the other federal agency.

(Some emphasis in original and emphasis added)

The whistleblower voluntarily reported information to a federal agency covered by the rule, which referred the matter to the SEC.  The SEC then opened an investigation.  Within 120 days of the initial report, the whistleblower provided the same information to the SEC and later provided substantial cooperation in the investigation.  Although the SEC report came after the staff had opened its investigation, the SEC treated the submission as though it had been made when the whistleblower provided the information to the other agency.

The SEC has awarded more than $264 million to 54 whistleblowers since issuing its first award in 2012.  All 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, according to the SEC, 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).


Kehoe Law Firm, P.C.