Washington, D.C., USA: The Securities and Exchange Commission said today that it has awarding $39 million to one whistleblower and $15 million to another whose critical information and continued assistance helped the agency bring an important enforcement action. The $39 million award is the second-largest award in the history of the SEC’s whistleblower program.
“Whistleblowers serve as invaluable sources of information, and can propel an investigation forward by helping us overcome obstacles and delays in investigation,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “These substantial awards send a strong message about the SEC’s commitment to whistleblowers and the value they bring to the agency’s mission.”
The SEC has awarded more than $320 million to 57 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.
By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
The whistleblower program was established by Congress to incentivize whistleblowers with specific, timely and credible information about federal securities laws violations to report to the SEC.
“Enforcement actions from whistleblower tips have resulted in more than $1 billion in financial remedies”, the SEC says.
“Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission. Through their knowledge of the circumstances and individuals involved, whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.” SEC says.
The SEC Whistleblower Program
The Dodd-Frank Act amended the Exchange Act by, among other things, adopting Section 21F, entitled “Securities Whistleblower Incentives and Protection .” Section 21F directs the Commission to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful Commission enforcement actions resulting in monetary sanctions over $1 million and successful related actions .
Awards must be made in an amount equal to 10 to 30 percent of the monetary sanctions collected .
To ensure that whistleblower payments would not diminish the amount of recovery for victims of securities law violations, Congress established a separate fund, called the Investor Protection Fund (Fund), from which eligible whistleblowers are paid.
The Commission established OWB, an office within the SEC’s Division of Enforcement (Enforcement), to administer and effectuate the whistleblower program . It is OWB’s mission to administer a vigorous whistleblower program that will help the Commission identify and halt securities frauds early and quickly to minimize investor losses .
In addition to establishing an awards program to encourage the submission of highquality information, Dodd-Frank and the Commission’s implementing regulations (Whistleblower Rules)6 prohibit retaliation by employers against employees who report possible wrongdoing based on a reasonable belief that a possible securities violation has occurred, is in progress, or is about to occur .
In adopting the Whistleblower Rules, the Commission recognized that whistleblower reporting through internal compliance procedures can enhance the Commission’s enforcement efforts in appropriate circumstances. Consequently, the Commission adopted strong incentives and protections for employees who choose to work within their company’s own compliance structure because they believe that the employer’s internal compliance function is an effective mechanism to address any potential wrongdoing .
Dodd-Frank’s Section 924(d) requires OWB to report annually to Congress on OWB’s activities, whistleblower complaints received, and the response of the Commission to such complaints .10 In addition, Section 21F(g)(5) of the Exchange Act requires the Commission to submit an annual report to Congress that addresses the following subjects:
• The whistleblower award program, including a description of the number of awards granted and the types of cases in which awards were granted during the preceding fiscal year;
• The balance of the Fund at the beginning of the preceding fiscal year;
• The amounts deposited into or credited to the Fund during the preceding fiscal year;
• The amount of earnings on investments made under Section 21F(g)(4) during the preceding fiscal year;
• The amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to Section 21F(b);
• The balance of the Fund at the end of the preceding fiscal year; and
• A complete set of audited financial statements, including a balance sheet, income statement, and cash flow analysis .
OWB, in consultation with other offices within the Commission, has prepared this report to satisfy the reporting requirements of Section 924(d) of the Dodd-Frank Act and Section 21F(g)(5) of the Exchange Act . The sections in this report addressing the activities of OWB, the whistleblower tips received during FY 2017, and the processing of whistleblower tips primarily address the requirements of Dodd-Frank’s Section 924(d) . The sections addressing the Fund and whistleblower incentive awards made during FY 2017 primarily address the requirements of Section 21F(g)(5) of the Exchange Act .
Section 924(d) of the Dodd-Frank Act directed the Commission to establish a separate office within the Commission to administer and enforce the provisions of Section 21F of the Exchange Act . Jane Norberg heads the Office as Chief of OWB . In May 2017, Emily Pasquinelli was promoted to Deputy Chief to fill the role vacated by Ms . Norberg when she was promoted to Chief . Additionally, OWB is staffed by eleven attorneys, four paralegals, and an administrative assistant . Below is an overview of OWB’s primary responsibilities and activities over the past fiscal year .
Assessment of Award Applications The whistleblower program was designed, in part, to provide a monetary incentive to corporate insiders and others with relevant information concerning potential securities violations to report their information to the Commission . As such, much of OWB’s work relates to the assessment of claims for whistleblower awards .
OWB posts a Notice of Covered Action (NoCA) on its webpage (www .sec .gov/ whistleblower/claim-award) for every Commission enforcement action that results in monetary sanctions of over $1 million . Anyone who believes that (s)he is entitled to a whistleblower award may submit an application in response to a posted NoCA . Before submitting an application, however, a whistleblower should ensure that there is a nexus between a whistleblower tip that (s)he provided to the Commission and what was ultimately charged in the enforcement matter .
OWB staff tracks investigations where a whistleblower has provided information or assistance to Enforcement staff . This case-tracking initiative provides early information to OWB about which matters may ultimately result in an award payout and allows OWB staff to provide subject matter expertise to Enforcement staff on whistleblower investigations, as needed .
Although it is ultimately a whistleblower’s responsibility to make a timely application for an award, OWB may contact whistleblowers who have been actively working with Enforcement staff—or who have previously contacted the office about the posting of a particular covered action—to confirm they are aware of the posting and applicable deadline for submitting claims for award .
After receiving an application for an award, OWB attorneys assess the application and the eligibility of the claimant and confer with relevant Enforcement or other Commission staff to understand the contribution of the claimant, if any, to the covered action . OWB then makes recommendations to the Claims Review Staff, currently comprised of five senior officers in Enforcement, as to award eligibility .