Whistleblower program generates eight tips a day on average, SEC says
The SEC has awarded $50,000 to an informant who helped stop a multi-million-dollar fraud in the first payout under the whistleblower program aimed at rewarding people for evidence of securities fraud.
The award amounts to 30 percent of the total collected by the SEC so far in the enforcement action resulting from the tip, the maximum allowed under the whistleblower law meant to encourage private tips on corporate malfeasance.
The SEC offers the reward in cases with sanctions of more than $1 mn and, at its discretion, can pay awards of as low as 10 percent.
‘This whistleblower provided the exact kind of information and cooperation we were hoping the whistleblower program would attract,’ Robert Khuzami, director of the SEC’s enforcement division, says in a press release.
‘Had this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.’
The SEC gave few details of the case that led to the payment, except to say that the informant, who asked not to be identified, ‘provided documents and other significant information that allowed the SEC’s investigation to move at an accelerated pace and prevent the fraud from ensnaring additional victims’.
The regulator says the court ordered more than $1 mn in sanctions and $150,000 have been collected thus far.
If the court orders more sanctions in verdicts on other defendants, the whistleblower’s reward will be adjusted accordingly.
The SEC says it denied reward payment to a second informant in the case, as the information provided didn’t significantly advance the investigation.
The SEC’s whistleblower program took effect about a year ago as part of the sweeping financial reforms of the 2010 Dodd-Frank Act.
A concern frequently raised about the whistleblower act was the possibility of it undermining companies’ internal reporting systems.
Although the act encourages whistleblowers to report their information internally first, it gives no penalty to whistleblowers who fail to do so.
The program also faced complaints that it could encourage the SEC to hand out fines of greater than $1 mn so it could meet the minimum amount needed to reward the whistleblower.
The SEC says it has been receiving an average of eight tips a day under the whistleblower program, helping to boost its enforcement efforts.
