The Securities and Exchange Commission (SEC) has made history by awarding a record-breaking $279 million to a whistleblower who provided information leading to a successful enforcement action. The SEC’s whistleblower program, established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, was designed to incentivize individuals with knowledge of law violations to come forward and report them to the agency.
Since its inception, the whistleblower program has been highly successful, resulting in over $4 billion in ill-gotten gains and interest disgorged from violators. This has led to a significant increase in the number and quality of enforcement actions brought by the SEC.
To be eligible for an award, the whistleblower must provide original, credible, and timely information to the agency about violations of federal securities laws. The information must lead to a successful enforcement action resulting in monetary sanctions exceeding $1 million. Whistleblowers may receive an award of between 10 and 30 percent of the monetary sanctions collected in a successful enforcement action, depending on the significance of the information provided, the assistance provided to the Commission, and the degree of hardship suffered.
Whistleblowers have had a significant impact on law enforcement since the creation of the program. By providing insider information about securities fraud and other violations, whistleblowers have enabled the agency to identify and prosecute a wide range of fraudulent activities, including Ponzi schemes, insider trading, and accounting fraud.
In addition to their contribution to securities law enforcement, whistleblowers also benefit from the whistleblower program. The program provides a mechanism for whistleblowers to report violations of laws without fear of retaliation. The SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity, allowing whistleblowers to come forward with information about wrongdoing without fear of losing their jobs or suffering other forms of retribution.
The SEC’s announcement of the largest-ever whistleblower award highlights the important role that whistleblowers play in uncovering and prosecuting securities fraud, and it sends a message to potential whistleblowers that they can receive substantial financial compensation for providing credible and timely information to the Commission.
