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Securities And Exchange Commission Awards More Than $500,000 To Whistleblower Under ‘Safe Harbor’ Law

On March 29th, 2021, the Securities and Exchange Commission (SEC) confirmed that the federal agency has awarded more than $500,000 to an individual who raised concerns internally before officially submitting a tip to the government. With the latest award, the agency has now granted nearly $800 billion to securities industry whistleblowers.

Notably, this case had some unique features. The whistleblower qualified for financial compensation under the ‘Safe Harbor’ provisions of the SEC’s whistleblower regulations. In this post, our Miami investment fraud attorneys discuss the federal agency’s latest award and explain how the Safe Harbor provision works.

SEC Whistleblower Compensation: More than $500,000 Awarded to Anonymous Individual 

Pursuant to federal regulations, the SEC only discloses a limited amount of information to the public when it awards whistleblower compensation. The agency is focused on protecting the anonymity of securities industry insiders who bring light to fraud and other legal violations.

In Whistleblower Award Proceeding File No. 2021-35, the SEC notes that the whistleblower made an internal disclosure before making any disclosure to the agency. That internal disclosure prompted an investigation and, relatively soon after, led to the shutdown of an ongoing securities fraud scheme.

The agency awarded more than $500,000 to the individual whistleblower. One issue that makes this SEC whistleblower award unique is that the agency relied on the ‘Safe Harbor’ provision contained in federal securities industry whistleblower laws when approving the financial award.

 Understanding the ‘Safe Harbor’ Provision in the SEC Whistleblower Laws 

To qualify for a whistleblower award, an individual or group of individuals must disclose non-public information and their disclosures must lead to successful enforcement action. However, the SEC does not want to discourage employees, contractors, and other insiders from raising potential concerns internally, within the company. For this reason, the Safe Harbor provision in SEC whistleblower laws instructs the agency to treat any information submitted internally within a company as if it was shared with the Commission itself at exactly the same time.

In other words, raising concerns of potential securities fraud internally is, for the purposes of SEC whistleblower law, the equivalent of submitting information to the agency. The date a whistleblower made their internal report is the effective date for their disclosure. From there, the whistleblower has 120 days to submit the information to the agency. As long as they make disclosures to the SEC within 120 days, then their internal report is treated as the date of disclosure.

Schedule a Strictly Confidential Consultation With an SEC Whistleblower Lawyer in Florida

At ​Carlson & Associates, P.A., our Miami, FL SEC whistleblower attorneys are standing by, ready to fight for your legal rights. If you are considering making a disclosure to federal authorities, we here to guide you through the process. Call us now to arrange your completely confidential consultation with a lawyer. We represent securities industry whistleblowers throughout the entirety of South Florida, including in Miami-Dade County, Palm Beach County, and Broward County.

Resources:

sec.gov/rules/other/2021/34-91426.pdf

sec.gov/news/press-release/2021-54

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