On March 29, 2021, the Securities and Exchange Commission (SEC) issued an Award of over $500,000 to a tipster whose disclosure allowed the SEC to shut down an ongoing fraudulent scheme. Specifically, this matter represented the SEC’s fortieth award this year (the SEC’s fiscal year ends September 30) to an individual whistleblower. With this award, the SEC has already surpassed last year’s record numbers of 39 awards issued, totaling some $175 million, for fiscal 2020.

As of end-of-March 2021, the SEC has issued approximately $200 million in whistleblower award money, surpassing last year’s total. In September 2020, the SEC approved amendments to its whistleblower program designed to increase efficiency and expedite the processing of award claims, factors likely contributing to the increased number of awards announced to date in 2021. Whistleblower awards can range from 10-30% of the funds collected by the SEC in enforcement actions, in instances where monetary sanctions exceed $1 million.

With regard to the March 29 Award Order, the whistleblower first reported suspected misconduct internally to their company. Subsequently, the whistleblower reported the alleged misconduct to the SEC. As set forth in the Award Order, the whistleblower “provided significant information that prompted the opening of the investigations by [a certain agency, as well as SEC] staff, met with them in-person, and continued to provide helpful documents.”

In rendering the whistleblower award, the SEC determined that, while the whistleblower had first reported their concerns internally before providing the information to the SEC, the whistleblower was nevertheless protected by a “safe harbor” provision to the whistleblower program rules. Specifically, in instances when a whistleblower files a tip with the SEC within 120 days of reporting the same information internally, under Exchange Act Rule 21F-4(b)(7), the SEC “will treat the information as though it had been submitted to the Commission directly from the individual at the same time that it was submitted internally.”

It is very important for whistleblowers to adhere to the SEC whistleblower program rules, including timely submitting any tip after reporting same internally, because it is the only way to ensure legal protection for the whistleblower under the Dodd-Frank Act. Among other things, the Dodd-Frank Act affords anti-retaliation protections to whistleblowers, but only if they have filed a whistleblower complaint prior to any such retaliation.

The attorneys at Giarrusso Law Group LLC have considerable experience with issues unique to the financial services industry, including rules and regulations related to the SEC’s Office of the Whistleblower. We can offer guidance concerning the reporting of potential violations of federal securities laws, or related malfeasance. Please contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, no-obligation, confidential consultation