The Securities and Exchange Commission Thursday awarded more than $2.2 million to a former company insider who first reported the information to another federal agency before taking it to the SEC.
Thursday’s award was the first one under a “safe harbor” rule in the securities law (Exchange Act Rule 21F-4(b)(7)).
Under the rule, if a whistleblower submits information to another federal agency, but also submits the same information to the SEC within 120 days, the SEC will treat the information as received by it on the same date the other agency received it.
That so-called 120-day safe harbor is important. Whistleblower awards can depend on who first tipped the SEC to the illegal behavior.
In Thursday’s award, the whistleblower voluntarily reported information to a federal agency covered by the rule, and that agency referred the complaint to the SEC.
The SEC then opened an investigation.
“Within 120 days of the initial report, the whistleblower provided the same information to the SEC and later provided substantial cooperation in the investigation,” the SEC said.
“Although the SEC report came after the staff had opened its investigation, the SEC treated the submission as though it had been made when the whistleblower provided the information to the other agency,” the SEC said.
Jane Norberg, chief of the SEC’s Office of the Whistleblower, said Thursday: “Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies. This award shows that whistleblowers can still receive an award if they first report to another agency, as long as they also report their information to the SEC within the 120-day safe harbor period and their information otherwise meets the eligibility criteria for an award.”
With Thursday’s award, the SEC has now paid more than $264 million to 54 whistleblowers since its first award in 2012.
Awards are paid out of penalties the SEC collects from securities law violators.
Whistleblowers can be eligible for an award when they voluntarily provide the SEC with “original, timely, and credible information” that leads to a successful enforcement action.
Awards can range from 10 percent to 30 percent of the money collected when sanctions are more than $1 million.
By law, the SEC is required to protect the confidentiality of whistleblowers and doesn’t disclose information that might reveal their identity.
The SEC’s redacted April 5, 2018 award order is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog.