SEC’s whistleblower payments top $1.35 billion, collects $5 billion

abdelaziz Fathi

The Securities and Exchange Commission said the total amount of payouts under its whistleblower program had topped $1.35 billion after the agency awarded $20 million to a tipster 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 that was only implemented in 2011.

The SEC, which began paying disbursements to whistleblowers in 2012, said the last bounty was granted to one person for blowing the whistle in an unknown wrongdoing. The tipster’s information and assistance led to successful enforcement actions by the federal agency.

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.

While it didn’t name the case involving the company that the award was connected to, the SEC said the whistleblower provided crucial information on an illegal scheme that was shared with the agency’s staff. The regulators’ interaction with him included multiple meetings and the identification of key documents and witnesses.

“Whistleblowers may lead to the success of an enforcement matter by providing information that causes an investigation or examination to open or that meaningfully advances an existing investigation,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower.

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.

The SEC’s whistleblower program was established in 2010 to encourage individuals to report high-quality tips and help the agency detect wrongdoing and better protect investors. The program is said to have significantly strengthened the SEC’s enforcement of the federal securities laws. Since the program’s inception, enforcement matters brought using original information from meritorious whistleblowers have resulted in orders for more than $5 billion in total monetary sanctions.

 

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