On April 21, the U.S. Securities and Exchange Commission (SEC) announced that it had awarded $6 million to joint whistleblowers who voluntarily provided original information which led to the opening of an examination resulting in a successful enforcement action.
According to the SEC, the whistleblowers’ “tip and supplemental submissions were helpful in connection with the Commission Examination as well as Exams’ ultimate examination findings.” The award order further notes that Exams referred the matter to Enforcement staff who “found the referral from Exams to be helpful as a roadmap to the investigation that resulted in the Covered Action.”
“Today’s award illustrates that the agency can leverage whistleblower information in various ways, including by prompting an examination,” said Jonathan Carr, Acting Chief of the SEC’s Office of the Whistleblower. “If that examination ultimately results in an enforcement action, the whistleblower may be eligible for an award.”
Through the SEC Whistleblower Program, qualified whistleblowers are eligible to receive monetary awards of 10-30% of the sanctions collected in connection with their disclosure when their information contributes to an enforcement action where the SEC is set to collect at least $1 million.
The SEC weighs a number of factors in determining the exact percentage to award a whistleblower. In this case, the Commission notes that it considered the following factors: “(1) the significance of information provided; (2) the assistance provided; (3) the law enforcement interest in deterring violations by granting awards; (4) participation in internal compliance systems; (5) culpability; (6) unreasonable reporting delay; and (7) interference with internal compliance and reporting systems.”
Established in 2010 with the passage of the Dodd-Frank Act, the SEC Whistleblower Program has now awarded a total of more than $2.2 billion to 444 individuals.
In FY 2024, the SEC Whistleblower Program received a record 24,980 whistleblower tips and awarded over $255 million, the third highest annual amount. According to SEC Office of the Whistleblower’s annual report, the most common fraud areas reported by whistleblowers in FY 2024 were Manipulation (37%), Offering Fraud (21%), Initial Coin Offerings and Crypto Asset Securities (8%), and Corporate Disclosures and Financials (8%).