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SEC limits award to $325,000 for ‘hesitant’ whistleblower

The Securities and Exchange Commission Wednesday announced a whistleblower award of $325,000 to a former investment firm employee who missed a bigger payout by waiting too long before tipping the agency about a fraud.

The whistleblower helped the SEC bring a successful enforcement action by describing the misconduct in detail and identifying the individuals involved in it, the agency said. 

But the whistleblower waited to go to the SEC until he or she had left the investment firm.

The SEC said the award could have been higher had the whistleblower not hesitated.

“Corporate insiders who become aware of securities law violations are encouraged to come forward without delay in order to prevent misconduct from continuing unabated while investors suffer more harm,” Andrew Ceresney, director of the SEC’s enforcement division, said in a statement.

By law, the SEC doesn’t intentionally disclose information that might reveal a whistleblower’s identity.

“Whistleblowers are afforded significant incentives and protections under the Dodd-Frank Act and the SEC’s whistleblower program so they can feel secure about doing the right thing and immediately reporting an ongoing fraud rather than letting time pass,” Ceresney said.

It was the first time the SEC said a whistleblower could have earned a bigger payout by moving faster.

The SEC whistleblower program started in 2011.

Since then, the SEC has awarded $54 million to 22 whistleblowers “who provided the SEC with unique and useful information that contributed to a successful enforcement action.” 

Whistleblower awards can range from 10 percent to 30 percent of recoveries when amounts collected are more than $1 million.

The biggest award was more than $30 million in 2014. And a 2013 award topped $14 million.

In July this year, the SEC awarded more than $3 million to a company insider whose information helped stop an ongoing complex fraud.

Sean McKessy, chief of the SEC’s whistleblower office, said Wednesday’s award underscored “the need for whistleblowers to report information to the agency expeditiously.”


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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