SEC Announces Whistleblower Award of $125,000


The U.S. SEC has announced its whistleblower award to a single individual at $125,000 million. However, some worry that the Supreme Court’s ruling on SEC disgorgement could prevent corporate tipsters from coming forward.

June 25 2020 | AtoZ Markets – The Securities and Exchange Commission (SEC) has awarded $125,000 to a whistleblower who alerted the SEC and another agency to a fraudulent scheme that preyed on vulnerable investors. The SEC whistleblower provided “highly significant” information to the Commission about the company’s scheme.

SEC awards whistleblower for prompting an investigation

According to an SEC press release, the whistleblower’s reporting led the SEC and another agency to bring successful enforcement actions against the company involved.

The tip the SEC whistleblower provided led to the opening of the investigation by the SEC.

“Whistleblowers continue to be the key to identifying fraud worldwide,” said whistleblower attorney Stephen M. Kohn, partner at qui tam law firm Kohn, Kohn & Colapinto. “The half a million dollars earned by SEC whistleblowers since 2012 is a result of courageous reporting and the SEC Program’s dedication to protecting whistleblowers.”

Related article: SEC Awards $700,000 to Whistleblower Following Investigation

The SEC Whistleblower Program protects the identity of whistleblowers and grants whistleblower awards to individuals whose disclosures bring on enforcement actions resulting in sanctions of $1 million or more.

“The whistleblower’s tip helped stop a fraudulent scheme that preyed on a vulnerable investor community,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “Whistleblowers like the individual receiving the award today provide a valuable public service, and we encourage others to come forward with information regarding possible securities laws violations.”

Supreme court’s ruling on SEC disgorgement could shrink whistleblower awards

Under SEC rules, whistleblowers are 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 percent to 30% of the money collected when the monetary sanctions exceed $1 million.

However, a U.S. Supreme Court decision that restricted the SEC’s practice of recovering ill-gotten gains from financial fraud could diminish future rewards for whistleblowers, lawyers representing corporate tipsters said.

The Supreme Court on Monday affirmed the SEC’s ability to recoup the money in alleged financial fraud cases. However, they said the regulator’s attempted recoveries need to “deduct legitimate expenses” and can’t exceed a wrongdoer’s net profits from the alleged fraud. The ruling also emphasized that recovered gains from alleged fraud should go back to investors.

Lawyers representing corporate whistleblowers are concerned that the ruling, which asks the SEC to consider legitimate business expenses in imposing disgorgement, will decrease the awards tipsters might receive since such payouts are tied to the total amount of monetary penalties issued in a case. Decreases in award totals could discourage some tipsters to come forward, they said.

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