SEC Issues Largest-Ever Award of $114 Million to Individual Whistleblower
The highest award in the history of the SEC whistleblower program is issued to an employee who repeatedly reported misconduct internally before alerting the SEC.
On October 22, 2020, the U.S. Securities and Exchange Commission ("SEC") announced an award of more than $114 million to an individual whistleblower, the largest award made since inception of the whistleblower program in 2012. Enacted pursuant to the Dodd-Frank Act of 2010, the SEC whistleblower program empowers the Commission to reward individuals who voluntarily provide original, timely, and credible information about a violation of the federal securities laws that leads to a successful enforcement action. Awards can range from 10% to 30% of the money collected by the SEC, where monetary sanctions exceed $1 million. The SEC has issued awards totaling $676 million to 108 individuals since 2012.
The landmark award of $114 million consists of $52 million awarded in connection with an SEC enforcement action and $62 million awarded arising out of a related action brought by another agency. The SEC described the actions of the whistleblower awarded $114 million as "extraordinary" and noted that the whistleblower had "repeatedly" reported concerns internally to the company before alerting the SEC and another agency. Notably, this award follows the Commission's recent decision to forego adoption of an amendment to the whistleblower program requiring enhanced review of whistleblower awards that exceed $30 million.
This landmark award follows a series of increasingly substantial whistleblower awards by the SEC in the last year. Given the current financial incentives for employees and other individuals to report potential violations of the securities laws, companies should focus on implementing a robust internal reporting system that encourages internal reporting and feedback. A successful compliance program is designed to appropriately address all complaints or allegations of potential violations of the securities laws, including anonymous tips, and provide for full and prompt investigation of all such tips, as well as timely implementation of any necessary remediation.
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