- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
The SEC awarded a total of $1.1 million to five whistleblowers for providing original information that led to three separate successful enforcement actions.
The first award totaled $490,000, split among three whistleblowers for assistance in two successful enforcement actions. According to the SEC Order, the first and second whistleblowers, an outsider and former employee, respectively, each were awarded $170,000 for the first enforcement action and $70,000 for the second enforcement action. The first whistleblower prompted the opening of both investigations, and the second whistleblower submitted supporting documentation for both actions. The third whistleblower was awarded $10,000 for identifying an important witness in the second enforcement action.
According to another SEC Order, a single whistleblower was awarded $600,000 for prompting the opening of the investigation, providing significant documents and identifying key witnesses.
In the third action, a whistleblower was awarded $100,000 for utilizing publicly available documents to demonstrate that at least one of the company's disclosures was false. The whistleblower's independent analysis revealed information that was "not apparent from the face of the publicly available materials" with respect to at least one key company metric.
Commentary
Though these whistleblower payouts were relatively small compared to some of the jaw-dropping amounts last year, the rising number of SEC actions based on whistleblower information deserves attention. At least one of the whistleblowers "repeatedly" reported their concerns internally. Companies that either do not take these complaints seriously or do not have mechanisms in place to address them properly are missing a significant risk mitigation opportunity. Firms should have robust internal reporting mechanisms for suspected misconduct and adequate procedures for investigating those claims. Anonymous helplines or hotlines that are managed by an independent third party or internal function that does not report to the business give companies the chance to get ahead of these issues and consider strategic decisions, such as self-reporting.
Primary Sources
- SEC Press Release: SEC Issues over $1.1 Million to Multiple Whistleblowers
- SEC Order Determining Whistleblower Award Claim: File No. 2021-20
- SEC Order Determining Whistleblower Award Claim: File No. 2021-21
- SEC Order Determining Whistleblower Award Claim: File No. 2021-22
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
