On September 15, 2021, the SEC announced it had paid out $4 million and about $110 million to two whistleblowers who provided information and assistance that led to successful SEC and related actions. The $110 million payout is the agency’s second largest award since it began issuing awards in 2012. With this recent announcement, the SEC has now issued $1.07 billion in awards to 207 individuals.
“Today’s announcement underscores the important role that whistleblowers play in helping the SEC detect, investigate, and prosecute potential violations of the securities laws,” SEC Chair Gary Gensler said in a news release. “The assistance that whistleblowers provide is crucial to the SEC’s ability to enforce the rules of the road for our capital markets.”
Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, echoed Gensler’s sentiments: “The whistleblower program has been instrumental to the success of numerous enforcement actions since it was instituted a decade ago. We hope that today’s announcement encourages whistleblowers to continue to come forward with credible information about potential violations of the securities laws.”
According to the SEC, the whistleblower who received $110 million conducted extensive investigations and analysis of publicly available information, which “was derived from multiple sources that were not readily identified and accessed by members of the public without specialized knowledge, unusual effort, or substantial cost.” The sources used “collectively raised a strong inference of securities law violations that was not otherwise reasonably inferable from any of the sources individually.”
To date, the SEC has awarded over $500 million in fiscal year 2021, which far exceeds the previous fiscal year’s record of $175 million. To put this into further perspective, the total awards under the Whistleblower Program from 2012 – 2020 amounted to $500 million. According to the SEC, the information provided by whistleblowers has resulted in more than $4.8 billion in financial remedies.
The uptick in awards may be the result of the SEC’s pro-whistleblower stance under Gensler, which could be encouraging more whistleblowers to come forward. Gensler has also put on hold two new controversial amendments that were part of last year’s new whistleblower rules, but were viewed as prohibitive to whistleblowers.
Congress authorizes the SEC to pay between 10% and 30% of any sanctions it collects above $1 million to eligible tipsters who provide “original, timely, and credible information” leading to the enforcement action. This essentially means the information must be unknown to the SEC and derived from the whistleblower’s independent knowledge or analysis. In addition to monetary awards, the SEC Whistleblower Program offers anti-retaliation protection (from employers) to whistleblowers and allows “tips” to be submitted anonymously.
As the public becomes more familiar with the rewards of the SEC Whistleblower Program, public- and private-sector partnerships will become the norm, ferreting out corporate malfeasance and paying out more awards.
If you have any “original information” about malfeasance at a public company, the attorneys at Robbins LLP can help. Please call us at 1-800-350-6003 or complete the form below.