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SEC Waives Rule 21F-4(a), Awards $3 Million to Joint Whistleblowers

On June 3rd, 2019, the Securities and Exchange Commission (SEC) issued an Order Determining Whistleblower Award Claim. For assisting in enforcement action, the federal securities regulator awarded a pair of joint whistleblowers $3 million in compensation, to be divided equally between the two parties.

Notably, in doing so, the SEC decided to voluntarily waive Rule 21F-4(a) — which would have otherwise prevented the agency from issuing a whistleblower award in this specific case. Here, our top-rated Miami whistleblower attorneys provide an overview of the decision from the Securities and Exchange Commission.

SEC Whistleblower Awards: What is Rule 21F-4(a)? 

To be eligible to obtain an award through the SEC’s whistleblower program, a claimant must satisfy a number of different criteria. Among other things, a person who is seeking a whistleblower compensation from the SEC must be able to prove that:

  1. They provided original information about a securities law violation; and
  2. They provided that information on a voluntary basis.

It is Rule 21F-4(a) that governs the requirement that information must be disclosed to regulators ‘voluntarily’. Essentially, whistleblowers are generally prevented from obtaining a financial reward for making disclosures if they provide information after they or their company is already under active investigation for securities fraud.

The SEC Waived Rule 21F-4(a) 

When circumstances warrant doing so, the Securities and Exchange Commission has the legal authority to waive certain whistleblower requirements. In issuing this $3 million whistleblower award in this case, the SEC decided to waive Rule 21F-4(a). Technically, the rule was not satisfied by the joint whistleblowers.

The agency determined that these joint whistleblowers came forward after another federal agency had already launched an investigation into their employer regarding the undisclosed securities law violation. However, using its discretion under federal law, the SEC decided to waive the Rule 21F-4(a) for both whistleblowers. The SEC pointed to the unique facts and circumstances surrounding the disclosures made by the claimants. Specifically, the agency noted that these whistleblowers were:

  • Unaware of the fact that another agency already made requests from their employer; and
  • Candid in their disclosures and helped to bring an enforcement action.

Finally, the SEC also stated that the denial of an award based on the technical requirements of Rule 21F-4(a) would produce an unfair result and cause undue hardship to the joint whistleblowers. Consistent with the larger aims of public policy in creating the SEC whistleblower award program, a $3 million award was issued. Since the creation of the program, the SEC has now granted 64 whistleblower awards worth more than $380 million. 

Speak to a Miami Whistleblower Lawyer Today

At ​Carlson & Associates, P.A., our Florida whistleblower claims attorneys are strong advocates for our clients. If you are considering making a protected disclosure to state or federal regulators, our law firm will protect your rights and interests. To set up a completely confidential review of your case, please contact us today. We have an office in Miami and we represent whistleblowers throughout Florida.

Resource:

sec.gov/rules/other/2019/34-86010.pdf

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