SEC Awards $275,000 to Whistleblower but Offsets Award for Monetary Judgment

Gavel and Black Briefcase

The SEC issued an order for an award of more than $275,000 to a whistleblower this week although it hasn’t yet announced the decision publicly on its website. True to past procedure, details about both the individual and the enforcement action have been redacted.  However, the individual receiving the award was the subject of a securities enforcement action as they owed the government money under a final judgment.

The order makes clear that there was both an enforcement action by the Securities & Exchange Commission as well as a related criminal action by an unspecified government body. Dodd-Frank authorizes the SEC to pay out under its whistleblower program based on the amount in related actions if certain conditions are met.

The award determination also indicates that the successful whistleblower was subject to an offset based on prior monetary obligations to the SEC from a final judgment entered against them. They were notified of this offset and did not object, according to the order. It is unclear whether the judgment against the person related to the case at issue or a previous incident of misconduct. The SEC program has special rules for the payout of a reward to a person that was involved in the securities law violations for which they are receiving an award.

The award determination process continues to see multiple applications for awards from whistleblowers. The presence of multiple individuals requesting awards seems likely to be one of the factors contributing to delayed award announcements.

In this case, the second individual challenged the preliminary determination of a denial. However, the person was unwilling to sign the confidentiality agreement provided by the government on its terms and therefore did not receive the record from the enforcement action. According to the SEC award order, the individual’s tip did not get passed on to the enforcement attorneys as it was initially categorized for no further action and they did not speak to the attorneys involved in the enforcement action.

I suspect that this is the first time that there has been multiple Dodd-Frank whistleblower rewards in one week. On Monday, the CFTC publicly announced its largest award to date – more than $10 million to an individual as a result of a tip.

To speak to our SEC whistleblower lawyers about this information or for an evaluation of a potential submission to the SEC, please call 1-800-590-4116.