SEC’s Whistleblower Program bars 2 individuals for frivolous claims

Rick Steves

The permanent bars imposed in these matters apply to any pending award application from the individuals at any stage of the review process, as well as to any future award application from the individuals.

The Securities and Exchange Commission has barred two individuals from the SEC’s whistleblower award program for having filed hundreds of frivolous award applications.

The filing of these applications consumed considerable staff time and resources, hindered the efficient operation of the program, and did not contribute to any successful enforcement action.

The individuals were repeatedly warned to stop submitting the abusive filings, but refused to do so. This led the SEC to take action against them in the form of a ban from the award program.

Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower, said: “Frivolous award applications hamper our ability to efficiently process awards to meritorious whistleblowers who come forward with helpful information intended to assist law enforcement. Today’s permanent bars send an important message that frivolous award filers will not be tolerated.”

The SEC’s whistleblower program awards individuals who voluntary submit high quality information that leads to the success of an enforcement action.

The permanent bars imposed in these matters apply to any pending award application from the individuals at any stage of the review process, as well as to any future award application from the individuals.

The program has recently surpassed the $1 billion mark in awards after a $110 million prize to a whistleblower last week, which stands as the second-highest award in the program’s history, following a previous $114 million prize issued in October 2020.

Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million. The SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity. The program issued its first award in 2012 and, less than ten years later, it has reached the $1 billion milestone.

In late July, the financial watchdog announced plans to review the whistleblower program. SEC Chair Gensler spoke before the National Whistleblower Center and, while reemphasizing his commitment to the agency’s whistleblower program, the top official revealed he plans to review the whistleblower program in order to improve its efficiency and effectiveness.

“The tips, complaints, and referrals that whistleblowers provide are crucial to the Securities and Exchange Commission as we enforce the rules of the road for our capital markets. Each week, when I see the Commission’s enforcement actions, I’m reminded how the whistleblower program helps us be better cops on the beat, execute our mission, and protect investors from misconduct”, said SEC Chair Gary Gensler.

The head of the Securities and Exchange Commission asked staff to examine whether and how the program can be further strengthened to ensure misconduct within the remit of the SEC is identified, addressed, and stopped.

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