The SEC has continued its multi-year pattern of awarding large financial rewards to whistleblowers who bring information regarding violations of SEC regulations to its attentions by announcing a $2.2 million award to be paid to an individual who came forth with such information. What makes this particular award especially notable is that it is the first time that the SEC has made an award to a whistleblower who first brought the information to a different federal agency through use of a 120-day “safe harbor” by which an individual has 120 days after making an initial report of wrongdoing to a different entity to bring the same information to the SEC’s attention and still obtain a reward.
As is typical for the SEC whistleblower program, the SEC did not release any information about the identity of the whistleblower nor the underlying securities violations or the parties who committed them. The SEC honors anonymity in order to encourage whistleblowers to come forward and obtain their rewards without fear of loss of privacy.
Typically, the SEC awards whistleblowers between 10% and 30% of the total funds recovered as part of its enforcement action prompted by the whistleblower’s tip.
The SEC’s Safe Harbor Provision for the Whistleblower Program
Under the so-called “safe harbor” rule in Exchange Act Rule 21F-4(b)(7), a person who first reports the information regarding SEC violations to the following types of entities can still win compensation via a whistleblower award if they bring that same information to the SEC within 120 days:
- Congress
- any other authority of the federal government
- a state Attorney General or securities regulatory authority
- any self-regulatory organization
- the Public Company Accounting Oversight Board
- an entity’s internal whistleblower, legal, or compliance procedures for reporting allegations of possible violations of law
In this particular case, the whistleblower had first reported the information to another federal agency before submitting it to the SEC. In general, the SEC wants “original information” regarding illegal acts so it can take appropriate action swiftly and encourage employees and other insiders to bring their information to the SEC promptly.
Why Working With a Whistleblower Attorney Can Be Key to Your Success
The safe harbor rule is indicative of the importance of working with an experienced whistleblower attorney to help in navigating the sometimes complex procedural aspects of winning recovery. This is especially true in light of a recent Supreme Court case, Digital Realty Trust, Inc. v. Somers, in which the court held that a company could terminate an employee who internally reported information regarding wrongdoing without bringing it to the attention of the SEC first.
Recovering Your Own SEC Whistleblower Award
If you are aware of misconduct in your organization that violates SEC regulations, you too may be able to recover a significant financial reward by presenting information related to the misconduct to the SEC Whistleblower Office. By working with an experienced whistleblower attorney, you can not only improve your chances of recovering an award, but also take steps to protect yourself from retaliation in the process.
At Kreindler & Associates, we are committed to helping whistleblowers win maximum compensation by bringing wrongdoing to light, while taking all necessary precautions to protect their interests. To learn more about how Kreindler & Associates can help in your SEC whistleblower matter, see here.
