The Securities and Exchange Commission Monday said a whistleblower will receive an award of between $475,000 and $575,000 for reporting “original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.”
The whistleblower was a former company officer.
Officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program.
But there’s an exception when when responsible compliance personnel have the information for more than 120 days and fail to take remedial action.
The award announced Monday was the first by the SEC under the officer exception.
Andrew Ceresney, chief of the SEC’s enforcement division, said, “Corporate officers have front-row seats overseeing the activities of their companies, and this particular officer should be commended for stepping up to report a securities law violation when it became apparent that the company’s internal compliance system was not functioning well enough to address it.”
The SEC has now made 15 whistleblowers awards since the program started three years ago. Payouts have totaled nearly $50 million. The money comes from an investor protection fund financed through financial sanctions collected by the SEC.
Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.
The SEC is required by law to protect the confidentiality of whistleblowers. The agency doesn’t disclose information that might reveal a whistleblower’s identity.
The biggest SEC whistleblower award last year was more than $30 million. It went to an individual living outside the United States. Previously the highest SEC whistleblower award was $14 million.
A copy of the SEC’s redacted March 2, 2015 award order is here.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.