On April 16, 2020, the Securities and Exchange Commission (“SEC”) awarded $27 million to a whistleblower who provided information that led to an SEC enforcement action. This was the largest award of 2020 and the sixth largest award since the SEC Whistleblower Program began in 2011.
While the order does not detail the conduct reported, the Commission described the whistleblower as having “repeatedly and tenaciously” voiced his concerns about the misconduct within his organization, and subsequently providing information to the SEC that helped unearth “hidden conduct” domestically and oversees.
The SEC whistleblower program was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and allows for monetary awards to incentivize people to voluntarily report securities violations to the SEC. The Commission has awarded more than $400 million to whistleblowers since the program’s inception.
Under the program, the SEC may award between 10-30% of any recovery to a whistleblower who provides original information about past, ongoing, or imminent securities violations that lead to an SEC enforcement action that recovers more than $1 million.
Whistleblowers may report fraud anonymously, as long as they have retained a lawyer to represent them and are afforded substantial protection against retaliation as mandated by section 922 of the Dodd-Frank Act.
Common violations include: Ponzi scheme, Pyramid Scheme, or High-Yield Investment Program; theft or misappropriation of funds or securities; manipulations of a security’s price or volume; insider trading; fraudulent or unregistered securities offering; false or misleading statements about a company, including false or misleading SEC reports or financial statements; abusive naked short selling; bribery of, or improper payments to, foreign officials; and fraudulent conduct associated with multiple securities transactions or public pension plans.
Just last week, ProPublica reported that a recent whistleblower complaint has led to an investigation into Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — for engaging in a systematic fraud in the commercial mortgage backed securities markets.
If you believe you have information that you would like to report to the SEC and would like to discuss further, please contact John Seredynski at jseredynski@lowey.com or 914-733-7234.