The SEC awarded $3 million to whistleblowers whose tip led to the launch of an SEC investigation and a subsequent successful enforcement action.

According to the SEC, the whistleblowers jointly provided information to the agency concerning an alleged securities law violation against retail investors. The whistleblowers also undertook "significant and timely" steps to have their employer remediate the harm caused by the alleged violations. SEC Office of the Whistleblower Chief Jane Norberg stated that "these whistleblowers showed great tenacity by repeatedly reporting internally and advocating for the firm to disclose the violative conduct and remedy the attendant investor harm."

The SEC found that the whistleblowers' tip was not provided voluntarily, pursuant to Exchange Act Section 21F(b)(1) and Rule 21F-4(a), due to a prior related request for information from another agency. However, the SEC determined that it was in the "public interest" to exercise its discretionary authority under Section 36(a) of the Exchange Act and waive the "voluntary" requirement of Rule 21F-4(a).

Commentary / Lex Urban

This case represents a rare circumstance where one of the threshold requirements for eligibility for a whistleblower award - that the whistleblower "voluntarily" provide the information - was not met. The SEC utilized its discretionary powers to issue an award anyway. Importantly, the whistleblowers did not know about the other agency's request for information at the time they reported their information to the SEC. Moreover, it was their candid discussions with the other agency that prompted the opening of an investigation and a subsequent request for information. This, coupled with the whistleblowers' help in the SEC's investigation, resulted in the SEC's award.

The SEC noted that the whistleblowers experienced hardships for raising concerns about the violations. Given that this is a possible reference to retaliation, it should serve as a reminder to companies to have clear guidelines and trainings regarding treatment of whistleblowers, and demonstrates that the SEC can bring enforcement actions in response to any retaliation against whistleblowers.

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