SEC pays $104 million to seven whistleblowers amid ever larger payouts

Rick Steves

Whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million.

The Securities and Exchange Commission has awarded more than $104 million to seven individuals as part of its whistleblower program, which was established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

The program offers monetary incentives to individuals who report possible violations of securities laws to the SEC, and whose information leads to successful enforcement actions.

The seven whistleblowers provided information and assistance that led to a successful SEC enforcement action and related actions brought by another agency.

The combined award of more than $104 million is the fourth largest in the SEC’s whistleblower program’s history.

Whistleblower awards range from 10-30% of monetary sanctions exceeding $1 million

Creola Kelly, Chief of the SEC’s Office of the Whistleblower, said: “Today’s awards show that specific and credible information plays an integral part in the SEC’s enforcement efforts. These whistleblowers provided information that helped Enforcement staff detect and prosecute wrongdoing in a timely manner.”

The seven whistleblowers were composed of two sets of joint claimants and three single claimants, and each provided information that either prompted the opening of or significantly contributed to an SEC investigation. Their assistance to the staff included providing documents supporting the allegations of misconduct, sitting for interviews, and identifying potential witnesses.

Payments to whistleblowers are made out of an investor protection fund, established by Congress, which is financed entirely through monetary sanctions paid to the SEC by securities law violators. The SEC clarified that no money has been taken or withheld from harmed investors to pay whistleblower awards.

Individuals that voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action, and adhere to filing requirements in the whistleblower rules, may be eligible for an award.

Whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million.

SEC paid record $279 million in whistleblower in May

In May, the SEC paid a record $279 million to an anonymous whistleblower who provided “critical and timely” information that led to a successful enforcement action against a company that violated securities laws.

The payout was the largest ever made by the SEC under its whistleblower program and more than double the previous record of $114 million, which was awarded in October 2020.

The US top regulators awarded the staggering $279 million after the whistleblower tips contributed to enforcement actions resulting in orders “requiring bad actors to disgorge more than $4 billion in ill-gotten gains and interest.” As this award shows, there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations, the SEC said.

Since the program’s inception, the SEC has awarded roughly $2 billion to whistleblowers. The agency says these payouts have been instrumental in helping it detect and prevent a wide range of securities violations, including insider trading, accounting fraud, and bribery.

The SEC’s whistleblower program has come under fire in recent years from some lawmakers and business groups, who argue that it incentivizes individuals to profit from reporting on their employers or colleagues. However, supporters of the program say it is a crucial tool in the fight against corporate fraud and misconduct, and helps protect investors and promote transparency in financial markets.

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