SEC Awards $1.25 Million To Whistleblower

On March 25th, 2022, the Securities and Exchange Commission (SEC) officially confirmed the award of $1.25 million in financial compensation to a whistleblower who provided credible and specific information to help regulators put a stop to securities fraud. SEC staff was able to open an investigation and has taken successful enforcement action because of the information voluntarily provided by the whistleblower. Here, our Miami investment fraud attorney outlines that latest award granted by the SEC, including the reason why the whistleblower granted less than the statutorily allowable maximum amount.

Whistleblower Disclosure Was Instrumental in Enforcement Action  

The SEC approved whistleblower compensation for the anonymous individual because they came forward and provided information that was novel, credible, and specific. Without the information, the SEC would likely have not been in a position to take enforcement action. Additionally, the SEC also emphasized that the whistleblower provided considerable assistance during the course of the investigation. With this assistance and general guidance from the whistleblower, the SEC was able to save time and resources. Consistent with federal regulations on securities industry whistleblowers, the SEC has only provided limited details about this case to the public. 

Maximum Award Was Not Issued—Delay in Reporting 

In its Order Determining Whistleblower Claim (File No. 2022-45), the SEC notes that the whistleblower was not entitled to receive the maximum amount of compensation allowed under the statute. When whistleblower compensation will be less than $5 million (based on the extent of the amount recovered via enforcement action), the SEC generally defaults to grant the maximum allowable 30 percent award to the whistleblower.

However, the SEC can award less if there is any “negative information.” In this case, the negative information was an “unreasonable delay” in reporting the suspected securities fraud to federal regulators. Upon review of the case, the SEC determined that the whistleblower could have made the disclosures two to three years earlier. Failure to act in a timely manner results in a decreased amount of whistleblower compensation. 

Several Factors Determine the Extent of Whistleblower Compensation 

There are multiple different factors that determine the extent of whistleblower compensation through the SEC’s program. The basis for a whistleblower award is always the amount that the government records for investors or the public through enforcement action. Whistleblowers may receive between 10 percent and 30 percent of the total amount recovered as award. The SEC has discretion to determine if the whistleblower should receive compensation on the high end or low end of that range. In deciding what to award, the SEC can review any factor deemed relevant.

Call Our Florida Securities Industry Whistleblower Attorney for Help

At ​Carlson & Associates, P.A., our Miami SEC whistleblower lawyers advocate for the rights and interests of insiders and other professionals who wish to disclose fraud. You can make a fully confidential disclosure to the Securities and Exchange Commission. Call us now for guidance and support. With an office in Miami, we provide SEC whistleblower representation throughout Florida.

Resources:

sec.gov/news/press-release/2022-52

sec.gov/rules/other/2022/34-94519.pdf