The SEC whistleblower program has announced an award to a compliance officer of approximately $1.5 million resulting from an issue raising imminent risk of financial harm to investors or the company.
Compliance professionals face some special rules when reporting to the SEC. In order to become eligible for an award, they must wait 120 days after informing one of a list of employees of the company or if he or she is told about the issue where circumstances indicate that the company is already aware of the noncompliance. For example, the employee does not have to tell anyone if informed by one of the individuals about the issue or made aware in a meeting where one or more of the individuals are present. The 120 day waiting period simply begins at that point.
The waiting period provides a check against compliance professionals circumventing the internal investigation process and going straight to the SEC. It also encourages companies to act promptly on tips raised through the internal reporting process of the company.
However, this case involved an exception to the 120 day waiting period. The SEC found the compliance officer had a reasonable basis to believe disclosure was necessary to prevent imminent misconduct from leading to financial harm to investors or the company. So even though he or she did not wait, they were nevertheless eligible for the reward.
Another exception that permits compliance and internal audit personnel to become eligible for an award without the waiting period is when the entity is impeding an investigation by the securities regulator.
In August 2014, another compliance whistleblower received $300,000 for reporting an issue internally and later filing a tip with the SEC when the company did nothing to correct the problem or report it. This individual waited for the 120 days to elapse prior to reporting the wrongdoing.
For additional information about the SEC program and eligibility for awards, please contact Eric Young or one of our other whistleblower attorneys.