On May 24, 2019, the Securities and Exchange Commission announced that it awarded more than $4.5 million to a whistleblower whose tip triggered the company to review the allegations as part of an internal investigation and subsequently report the whistleblower’s allegations to the SEC and another agency.
According to the SEC, the whistleblower sent an anonymous tip to the company alleging significant wrongdoing and submitted the same information to the SEC within 120 days of reporting it to the company. This information prompted the company to review the whistleblower’s allegations of misconduct and led the company to report the allegations to the SEC and the other agency. As a result of the self-report by the company, the SEC opened its own investigation into the alleged misconduct. Ultimately, when the company completed its internal investigation, the results were reported to the SEC and the other agency. This is the first time a claimant is being awarded under this provision of the whistleblower rules, which was designed to incentivize internal reporting by whistleblowers who also report to the SEC within 120 days.
The SEC has now awarded approximately $381 million to 62 individuals 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 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.
On Feb. 21, 2018, the U.S. Supreme Court issued an opinion in Digital Realty Trust, Inc. v. Somers stating that the Dodd-Frank anti-retaliation provisions only extend to those persons who provide information relating to a violation of the securities laws to the SEC. The SEC protects the confidentiality of whistleblowers and does not disclose information that could reveal a whistleblower’s identity as required by the Dodd-Frank Act.