SEC Whistleblower Program Gaining Traction as the SEC Announces a $14 Million Award

The SEC announced on Tuesday, October 1, 2013, an award of more than $14 million to a whistleblower whose information – provided to the SEC through his or her attorneys – resulted in an SEC enforcement action which led to the recovery of substantial investor funds.  In the Order Determining Whistleblower Award Claim, the Commission wrote that the expected dollar amount of the award – more than $14 million – “appropriately recognizes the significance of the information that the Claimant provided to the Commission, the assistance the Claimant provided in the Commission action, and the law enforcement interest in deterring violations by granting awards.”

The SEC Whistleblower Program was established in 2011, and was authorized by the Dodd-Frank Act (which was enacted on July 21, 2010).  Although the Program is now approximately three years old, the $14 million award announced Tuesday is still only the third award made by the SEC pursuant to the Whistleblower Program.  Yet, it is by far the largest award.  The whistleblower program rewards “high-quality original information” leading to an SEC enforcement action with sanctions exceeding $1 million.  When that threshold is reached in a case initiated because of the whistleblower’s information, that person is entitled to receive an award that can range from 10 to 30 percent of the Government’s total recovery.

In the prior two awards announced by the SEC, in August 2012 and then again in August 2013, the whistleblower awards were $50,000 and $125,000, respectively.  The $14 million award announced Tuesday is reflective of the fact that the fraud in that case was likely much more substantial and that the perpetrators had the ability to pay sanctions, fines and restitution.  The total amount recovered because of this information was between $47 million and $140 million.

Since the start of the SEC Whistleblower Program the SEC reported that it had received 3,335 tips through the end of Fiscal Year 2012, and continues to receive whistleblower tips at the rate of about 8 per day.  The fact that only three awards have been made suggests that the SEC staff is overworked, that it is taking substantial time for even good tips to work through system, that the overall quality or presentation of at least some of the whistleblower information is poor, or some combination of those or other reasons.  Without a doubt, being represented by seasoned whistleblower attorneys is a key advantage to success since experienced counsel will know how to evaluate and present the information and claims to the SEC for maximum impact, and consequently those better-presented claims invariably will get to the “front of the line.”  All of the SEC Whistleblowers who have recovered awards under the program have chosen to remain anonymous – and anonymous SEC whistleblowers must be represented by counsel.


For help with an SEC Whistleblower claim, contact experienced whistleblower and False Claims Act attorneys at the Rabon Law Firm.

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