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SEC issues multiple whistleblower awards, including award based on DOJ agreement
On February 23, the SEC announced a more than $9.2 million award to a whistleblower whose information and assistance led to successful related DOJ actions. This marks the first SEC whistleblower award based on a DOJ non-prosecution agreement or deferred prosecution agreement since amendments to the SEC’s whistleblower program rules took effect last December (covered by InfoBytes here). The SEC noted that the whistleblower was previously awarded for his contributions to a successful SEC enforcement action based on the same information that supported the DOJ’s actions, which is a prerequisite in order to be eligible for a related-action award. According to the redacted order, the whistleblower provided significant, original information to the SEC about an ongoing fraud that “enabled a large amount of money to be returned to investors harmed by the fraud.” The SEC provided the information to the DOJ, noting that the whistleblower provided significant assistance by traveling at the whistleblower’s own expense to be interviewed by DOJ.
Earlier on February 19, the SEC announced whistleblower awards totaling nearly $3 million in two separate enforcement actions. According to the first redacted order, the SEC awarded a whistleblower over $2.2 million for providing original information that significantly contributed to the investigation and resulted in the “return of millions of dollars to harmed clients.” According to the SEC, the whistleblower also “took personal and professional risks by raising concerns internally in an effort to remedy the misconduct.”
In the second redacted order, the SEC awarded a whistleblower nearly $700,000 for alerting Commission staff to a fraudulent reporting scheme, which prompted the opening of an investigation. The SEC noted that the whistleblower voluntarily provided critical documents and information to Commission staff, helped identify key documents and witnesses, thus conserving SEC time and resources, and “internally raised concerns about the perceived conduct in an effort to remedy the violations.”
The SEC has now paid approximately $750 million to 136 individuals since the inception of the program in 2012.
SEC issues nearly $600,000 whistleblower award
On January 14, the SEC announced a whistleblower award of nearly $600,000 in connection with a successful enforcement action. According to the redacted order, the whistleblower provided new, highly valuable information during the course of the investigation, as well as substantial assistance, including meeting with enforcement staff numerous times and providing critical investigative leads. Additionally, the SEC notes that “there is a close nexus” between the whistleblower’s information and certain charges in the covered action.
The SEC has now paid approximately $738 million to 134 individuals since the inception of the program.
SEC issues whistleblower awards totaling over $1.1 million
On January 7, the SEC announced whistleblower awards totaling over $1.1 million in separate enforcement actions. According to the first redacted order, the SEC awarded three whistleblowers nearly $500,000 for providing information in two related enforcement actions. Information voluntarily provided by the first whistleblower—a company outsider—prompted the opening of the investigation, while the second and third whistleblowers provided significant information contributing to the success of the actions, while also assisting investigative staff.
In the second redacted order, the SEC awarded a whistleblower nearly $600,000 for voluntarily providing information leading to a successful enforcement action, assisting Commission staff, and repeatedly reporting “concerns internally in an effort to correct the problems at the company.”
In the third redacted order, a whistleblower was awarded more than $100,000 for providing independent analysis leading to a successful enforcement action. The whistleblower, among other things, “used information from various publicly available documents to calculate an estimate of an important metric for [the company],” and then “showed that the [c]ompany’s disclosures regarding that metric were implausible.” According to the SEC, this is the fifth individual who received an award based on independent analysis in fiscal year 2021.
The SEC has now paid approximately $737 million to 133 individuals since the inception of the program.
SEC issues whistleblower awards totaling over $5.2 million
On December 22, the SEC announced a more than $1.6 million award to a whistleblower whose critical information and assistance led to a successful SEC enforcement action. According to the redacted order, the whistleblower provided ongoing assistance to SEC staff as well as “original information that solidified their suspicions about certain defendants’ fraudulent” actions despite concerns about personal safety.
Earlier, on December 18, the SEC announced whistleblower awards totaling over $3.6 million in three separate enforcement actions. According to the first redacted order, the SEC awarded a whistleblower more than $1.8 million for voluntarily providing significant information and substantial assistance to SEC staff in a successful enforcement action. The whistleblower provided information—which “revealed a hard to detect fraudulent scheme” leading to the return of millions of dollars to harmed investors—and also “took immediate steps to mitigate the harm to investors and suffered hardships for doing so.”
In the second redacted order, the SEC awarded a whistleblower over $1.2 million for providing information leading to a successful enforcement action, although the Commission noted that the award amount was impacted after it determined the whistleblower “was culpable for actively participating in and financially benefiting from the fraudulent scheme” and “unreasonably delayed reporting” the scheme to the SEC.
In the third redacted order, a whistleblower was awarded more than $500,000 for providing significant information and ongoing assistance to SEC staff in a successful enforcement action. However, the SEC rejected the whistleblower’s claim that a higher award amount was warranted after it determined, among other things, that the whistleblower “unreasonably delayed reporting the misconduct for several years while investors were being harmed.”
The SEC has now paid approximately $736 million to 128 individuals since the inception of the program.
SEC awards whistleblower with audit responsibilities more than $300,000
On December 14, the SEC announced a more than $300,000 whistleblower award in connection with a successful enforcement action. According to the redacted order, in connection with the whistleblower’s audit-related responsibilities, the whistleblower became aware of potential securities law violations and voluntarily provided original information that contributed significantly to the enforcement action. The whistleblower also met with enforcement staff numerous times, helped to identify potential witnesses, and “aggressively attempted to remedy the misconduct and suffered a unique hardship.” The SEC notes in its press release that while individuals with audit or compliance responsibilities are generally ineligible for awards, “a whistleblower who reasonably believes that an entity is engaging in conduct that would impede the investigation falls within one of the exceptions to that rule.” This is the fourth award paid to a whistleblower with internal audit or compliance-related responsibilities.
The SEC has now paid approximately $731 million to 124 individuals since the inception of the program.
FINRA fines firm for AML and due diligence violations
On December 4, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), fining a New York-based member firm $55,000 for allegedly failing to implement a reasonable anti-money laundering (AML) program for transactions involving low-priced securities. The firm also allegedly failed to establish a due diligence program for monitoring and reporting “known or suspected money laundering activity conducted through or involving correspondent accounts for foreign financial institutions.” According to FINRA, the firm failed to, among other things, (i) “include reasonable procedures for the surveillance of potentially suspicious trading in low-priced securities,” such as listing “some of the most relevant red flags”; (ii) ensure its surveillance reports and tools were “reasonably designed to detect and cause the reporting of potentially suspicious activity”; and (iii) reasonably respond to red flags received from a clearing firm related to potentially suspicious activity. FINRA also claimed that the firm failed to identify all of its foreign financial institution accounts (FFIs) due to a lack of systems or processes to do so. Specifically, the firm allegedly failed to review 33 correspondent accounts for FFIs, nor did it identify 15 of these 33 accounts as FFIs. As a result, the firm allegedly violated FINRA Rules 3310(b) and 2010. The firm neither admitted nor denied the findings set forth in the AWC agreement but agreed to pay the fine, address identified deficiencies in its programs to ensure compliance with its AML obligations, and provide a certification of compliance with FINRA Rule 3310.
SEC issues whistleblower awards totaling nearly $3 million
On December 7, the SEC announced whistleblower awards to five individuals totaling nearly $3 million for information provided in three different enforcement actions. According to the first redacted order, the SEC awarded a whistleblower nearly $1.8 million for voluntarily providing original information to the Commission leading to a successful enforcement action. The whistleblower, a company insider, provided detailed information that would have been difficult to detect in the absence of the tip and “provided extraordinary assistance” to Commission staff, which resulted in the return of money to harmed investors.
In the second redacted order, the SEC awarded two whistleblowers a total of approximately $750,000. The first whistleblower received a roughly $500,000 award for providing “credible [and] high quality” information directly to enforcement staff, which prompted the opening of an investigation and resulted in a successful enforcement action. The second whistleblower received approximately $250,000 for providing new information towards the end of the investigation “that resulted in the inclusion of additional allegations in the Covered Action.” The SEC noted that both whistleblowers provided substantial assistance in the investigation, including participating in interviews and providing explanations and clarity on complex issues.
In the third redacted order, two whistleblowers were jointly awarded nearly $400,000 for providing information that prompted the opening of an investigation leading to a successful enforcement action. The SEC stated that the whistleblowers also “provided substantial and continuing assistance to [e]nforcement staff during the course of the investigation.”
The SEC has now paid approximately $731 million to 123 individuals since the inception of the program.
SEC announces whistleblower awards totaling over $6.9 million
On December 1, the SEC announced a joint award of over $6 million to two whistleblowers whose information and assistance led to a successful SEC enforcement and related actions. According to the redacted order, the information led to “actions related to a complex [redacted] scheme involving multiple individuals and tens of millions of dollars in ill-gotten gains.” Moreover, the whistleblowers “substantially assisted” the SEC and another agency by “submitting information and documents, participating in interviews, and identifying key individuals involved in the misconduct.”
Earlier on November 19, the SEC announced a whistleblower award of over $900,000 in connection with an ongoing overseas securities investigation. According to the redacted order, the whistleblower provided “significant and timely information” to the Commission, which expanded and expedited the investigation and resulted in Commission charges. Additionally, the whistleblower “identified alleged violations that were occurring overseas, some of which would have been difficult to detect in the absence of [the whistleblower’s] information.”
The SEC has now paid a total of $728 million to 118 individuals since the inception of the program.
SEC awards $1.1 million to whistleblower
On November 13, the SEC announced a whistleblower award of over $1.1 million in connection with a successful enforcement action. According to the redacted order, the whistleblower provided information to the agency during an active investigation that led the SEC to inquire into different conduct. Additionally, the whistleblower “provided exemplary and continuing assistance” to the SEC, saving the agency time and resources. Lastly, the information and assistance was “critical” in order for the SEC to “bring an emergency action before assets could be dissipated.”
The SEC has now paid approximately $720 million to 113 individuals since the inception of the program.
SEC issues two separate whistleblower awards totaling over $4.3 million
On November 5, the SEC announced two separate whistleblower awards totaling over $4.3 million. According to the first redacted order, the SEC awarded a whistleblower more than $3.6 million for (i) providing information that alerted enforcement staff to misconduct occurring abroad that would otherwise “have been difficult to detect”; (ii) providing “substantial and ongoing assistance” to enforcement staff, including traveling to another country to meet with staff in person at the whistleblower’s own expense and providing “extensive supporting documentation”; and (iii) suffering hardships due to the whistleblowing. The SEC further noted in the order that while the whistleblower’s “ministerial role in the underlying misconduct” was considered, the Commission did not reduce the award for culpability as the whistleblower “took exceptional steps to report the misconduct from abroad and provided extraordinary assistance.”
In the second redacted order, the SEC awarded $750,000 to a whistleblower for providing significant information that led to a successful enforcement action. According to the SEC, while the covered action was already open when the whistleblower provided the original information, the whistleblower’s information caused enforcement staff to investigate different conduct, which ultimately formed the basis for the covered action. The whistleblower also met with Commission staff in person and explained “the likely mechanics of the fraudulent scheme.”
The SEC has now paid approximately $719 million to 112 individuals since the inception of the program.