SEC awards $6 million to whistleblowers, payouts top $1.3 billion

abdelaziz Fathi

The Securities and Exchange Commission on Friday said the total amount of payouts under its whistleblower program had topped $1.3 billion after the agency awarded $6 million to two tipsters for flagging wrongdoing.

That marks yet another milestone for the top US cop’s whistleblower program, which was created by the 2010 Dodd-Frank Act and was then implemented in 2011.

The SEC, which began paying disbursements to whistleblowers in 2012, said the first bounty was granted to one person for blowing the whistle in an unknown wrongdoing. In this case, the agency issued an award of more than $3 million to a whistleblower who was solicited to invest in a product that he believes was being misrepresented. The individual alerted the SEC to the potential misconduct, which prompted the opening of the investigation, and continued to cooperate with the enforcement staff.

In the second case, an unspecified insider provided information that resulted in a successful enforcement action. He initially reported his concerns internally, and later submitted a detailed tip and met with the SEC’s enforcement staff multiple times to provide additional information during the investigation.

The US regulators consider several factors in determining the size of whistleblower awards. As long as their internal disclosure prompted a company investigation, they can benefit from all the information discovered in that investigation. However, whistleblowers should also report to the SEC within 120 days of the internal disclosure. Then, the commission uses the date of the internal report in determining whether they provided original information.

Under the SEC’s program, whistleblowers can also be paid for information that prompts sanctions by other regulators, as long as they were eligible for an award in the underlying SEC action.

“When confronted with potential wrongdoing, today’s whistleblowers refused to look the other way, but instead, chose to do the right thing by reporting it to the SEC. Insiders and outsiders alike can make a tremendous impact on the SEC’s ability to detect misconduct and protect investors when they decide to become whistleblowers,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower.

Committed to protecting the anonymity of informants, neither the tipsters nor the firms accused of misconduct were identified by the regulatory agency.

In September, the SEC paid $110 million to a tipster whose independent analysis provided the agency with important insights into the extent of a company’s misconduct. The award stands as the second-largest one in the agency program’s history.

 

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