March 30th, the U.S. Securities and Exchange Commission (SEC) announced a Dodd-Frank Act whistleblower award of $450,000 given to an individual whose significant information helped in an investigation.
According to an SEC press release, the whistleblower, who chose to remain anonymous, became eligible for an award after reporting concerns about internal compliance. The whistleblower, who had compliance-related responsibilities, reported concerns about the relevant conduct internally within the company and then waited 120 days before reporting to the SEC. In most cases, the SEC regulations require employees with compliance-related functions to wait 120 days prior to filing an award claim.
This award is the SEC’s third whistleblower award to an individual who had compliance or internal audit responsibilities.
“The SEC’s Office of the Whistleblower is doing a great job in continuing to process reward decisions despite the ongoing coronavirus pandemic,” said whistleblower attorney Stephen M. Kohn, partner at Kohn, Kohn & Colapinto. It is a recognition of the vital role whistleblowers will play in stopping securities fraud, especially in light of the current volatility in the markets.”
“Compliance officials are on the front-lines of preventing fraud against shareholders. The SEC must be commended for using the award program to ensure that publicly traded companies have effective and honest internal controls,” Kohn added.
According to the order from the SEC;
although not the source of the investigation, Claimant’s information was significant in that it refocused the investigation on the violations that were ultimately charged;
Claimant assisted Commission staff early in the investigation including by meeting with them in-person;
Claimant suffered unique hardships as a result of Claimant’s internal reporting, including internal compliance program.
“To ensure that important information about securities laws violations is reported to the SEC when appropriate corrective action is not taken by the company, the rules permit awards to compliance professionals in certain limited circumstances,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “Here, the whistleblower made reasonable efforts to work within the company’s compliance structure, suffered unique hardships as a result, and reported to the Commission after the requisite time period had passed, ultimately providing meaningful assistance to the Commission’s investigation and subsequent enforcement action.”
Whistleblowers can file anonymous and confidential reward claims under the Dodd-Frank Act, the Securities Exchange Act, and the Commodity Exchange Act. If a whistleblower’s original information results in a sanction, the law requires that the whistleblower a monetary award of between 10% and 30% of all fines and penalties collected.
Read the SEC press release: SEC Awards $450,000 to Whistleblower
Ben Kostyack also contributed to this article