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Whistleblower Receives Million Dollar Award from SEC


The Securities and Exchange Commission (SEC) began the whistleblower program back in 2011, compensating employees who report illegal activity by their employers. Since that time, the SEC has awarded over $50 million to whistleblowers who voluntarily provided the SEC with information leading to a successful enforcement action resulting in sanctions. Very recently, the SEC announced a sizable award for one whistleblower, the most that has been awarded to date.

Requirements for Receiving a Whistleblower Award

Only certain employees will qualify for an award under the SEC’s whistleblower program. To become eligible for the award, whistleblowers must meet specific requirements – specifically, by voluntarily providing high-quality, original information that leads to a successful enforcement action involving sanctions exceeding $1 million.

Information is considered “original” only if it is derived from the employee’s “independent knowledge or independent analysis.” This generally does not include information coming from a whistleblower whose primary duties involve compliance or internal auditing. There are some exceptions, however, since employees who perform internal audit or compliance functions are typically the best-situated to prevent fraud and corruption. To date, the SEC has only made two awards to employees in audit or compliance positions.

Benefits for Whistleblowers Who Report Illegal Conduct

Awards given to eligible whistleblowers usually range from 10%-30% of the money collected in the case brought against the employer. The payments are made through a fund that is entirely financed by the monetary sanctions paid to the SEC for violations of securities laws. Whistleblowers are protected by law, and the SEC is not allowed to disclose any information that may directly or indirectly reveal their identities.

Million Dollar Award Goes to Compliance Officer

On April 22, 2015, the SEC released a statement regarding a recent award to a compliance officer who had a reasonable basis to believe imminent misconduct by the employer would cause substantial financial harm to the company or investors, and that that disclosure to the SEC was necessary to prevent such harm. This compliance officer will receive the maximum award payment of 30 percent of amounts collected in the case. This will result in an award between $1.4 and $1.6 million.

Andrew Ceresney, Director of the SEC’s Division of Enforcement, explained the division’s reasoning this way: “when investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC. This compliance officer reported misconduct after management became aware of potentially impending harm to investors and failed to take steps to prevent it.”

This is the second award the SEC has made to an employee with internal audit or compliance responsibilities. In August 2014, the SEC made its first award to an employee in an audit or compliance position. That employee was awarded more than $300,000 after reporting the employer’s wrongdoing to the SEC. The company had failed to take action when the employee first reported the wrongdoing internally.

If you feel you need whistleblower protection, or if you have other questions pertaining to the misconduct of your employer, do not hesitate to get in touch with a capable employment lawyer from Birmingham. Our premier legal team at Michel | King , can be reached via our online form or by calling us at (205) 265-1880.

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