Lynn predicted several months ago that this would be the year that the SEC would surpass the $1 billion mark for lifetime awards under its whistleblower program. That happened on Wednesday, when the SEC announced its second-highest award in the history of the program – $110 million! – along with a $4 million award.
The SEC’s press release recaps how many payouts there have been since the whistleblower program started – and where the money comes from:
The SEC has awarded approximately $1 billion to 207 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.
This Compliance Week article says that over $500 million has been awarded this fiscal year alone, on top of $175 in fiscal 2020! The Commission is on a roll, and as this Arnold & Porter memo explains, Chair Gensler has signaled that he may unwind the limitations on whistleblower awards that were put in place during the prior administration. I blogged when those rules were adopted that they were somewhat controversial.
The biggest award ever happened in October last year, in the amount of $114 million. Of course, we never know for sure who these payments are made to or what allegations are involved, but the order says that the big winner here contributed significant independent information that raised a strong inference of securities law violations, and suffered significant hardships because of it. I blogged earlier this year about what companies can do to prepare for the possibility of a whistleblower.
– Liz Dunshee