SEC Whistleblower Award Criteria
The Dodd-Frank Act amended the Securities Exchange Act of 1934 (the “Exchange Act”) by, among other things, adding Section 21F, entitled “Securities Whistleblower Incentives and Protection.” Section 21F directs the Commission to make monetary awards to eligible individuals who voluntarily provide “original information” that leads to successful Commission enforcement actions resulting in monetary sanctions over $1 million, and successful related actions.
SEC Whistleblower Awards are required to be made in an amount equal to 10 to 30 percent of the monetary sanctions collected. How one cooperates, assists, and presents their assistance to the SEC directly impacts what, if any, reward any whistleblower may obtain and every one percent may mean a difference of millions of dollars in an increased reward.
The Commission established the Office of the Whistleblower, a separate office within the SEC’s Division of Enforcement, to administer and effectuate the whistleblower program. It is the Office of the Whistleblower’s mission to administer a whistleblower program to help the Commission identify and halt frauds early and quickly to minimize investor losses.
In addition to establishing an awards program to encourage the submission of high-quality information, the Dodd-Frank Act and the Commission’s implementing regulations (the “Whistleblower Rules”) prohibit retaliation against whistleblowers who report possible wrongdoing based on a reasonable belief that a possible securities violation has occurred, is in progress, or is about to occur.
The whistleblower program was designed to complement rather than replace existing corporate compliance programs. While it provides incentives for insiders and others with information about unlawful conduct to come forward, it also encourages those employees involved in compliance and the audit committee to work within their company’s own compliance structure, if appropriate, before coming to the SEC, although such requirement does not always apply. The SEC Rules, which we participated in originally crafting, regarding how one must go about submitting tips, how one can remain anonymous even to the SEC if they choose, and what if any actions one must take internally before submitting any tip to the SEC are complex and not to be ignored. Otherwise your application for any award will be disqualified, as many have been.