SEC Whistleblower Program Makes Its Bones With $14 Million Award

The U.S. Securities and Exchange Commission (SEC) awarded an unnamed tipster more than $14 million, obliterating all doubt about the resolve of the agency’s whistleblower program.

The SEC didn’t identify the underlying enforcement action in either its press release or a related order, but the award’s enormous size  indicates that the U.S. government may reap as much as $140 million in penalties as a result of the whistleblower’s information.

As established by the Dodd-Frank Act in 2010, the SEC’s whistleblower program pays bounties of 10% to 30% to informants who provide significant help in cases that result in the collection of  more than $1 million in fines for securities violations.

Whistleblower awards aren’t deducted directly from the penalties; instead they come from a special “Investor Protection Fund” created by the Dodd-Frank law.

The SEC didn’t reveal the percentage of the award in this case, nor did it supply any details about the whistleblower, whose anonymity the agency is obliged to protect.

This week’s $14 million payout dwarfs the handful of previous awards from the SEC’s Office of the Whistleblower — and backs up recent statements by the office’s director, Sean McKessy, who has responded to skeptics by hinting that, after a slow start, “very big numbers” are on the way.

Mr. McKessy also said recently that his office is “on the lookout” for cases that will showcase its determination to enforce another Dodd-Frank mandate: To protect whistleblowers from retaliation — even where a tipster provides the SEC with information in good faith, but turns out to be wrong.

Tagged: Dodd-Frank Act, Enforcement Bodies, Fraud Types, Securities and Exchange Commission (SEC), Securities Fraud, Whistleblower Laws (Federal)