The Securities and Exchange Commission weighed the timing and content of evidence supplied by two whistleblowers regarding malfeasance at a financial services firm before awarding them a combined $22 million.
The first whistleblower, who was the initial source of the investigation, received $18 million. A second whistleblower who submitted additional information several years after the investigation began earned a $4 million award.
“This case demonstrates once again the value of the whistleblower program in helping to protect investors, and the Commission’s continued commitment to rewarding individuals who provide high-quality tips,” said Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower, in a press release Monday.
The SEC’s order sheds more light on the decision to offer vastly different sums to the two whistleblowers, who exposed and explained how the financial services firm operated a complex fraud. The SEC does not identify whistleblowers in announcing its awards, in keeping with the whistleblower statute contained in the Dodd-Frank Act.
The first tipster’s information was deemed more important because it was more timely, and it formed the basis of the SEC’s understanding of the fraud, the agency said. The first whistleblower also “suffered hardships” for coming forward, the SEC said.
The second whistleblower’s information was reduced because of an “unreasonable reporting delay,” according to the SEC.
The first whistleblower provided “extensive and ongoing assistance” to investigators, “including identifying witnesses and helping staff understand complex fact patterns and issues related to the matters under investigation.” The SEC used testimony from the first whistleblower to “devise an investigative plan and craft its initial document requests.”
The second whistleblower provided a first-person perspective that “gave the staff a more complete picture of how events from an earlier period impacted the respondents’ practices” and helped the staff recognize the firm was likely not complying with some requests for information.
At least by the end of the investigation, it was clear the two whistleblowers were not working together. The first whistleblower argued the SEC should award him or her the maximum 30 percent of the total penalty, and that the second whistleblower should receive nothing. The first whistleblower said the information provided by the second whistleblower was part of the testimony the SEC received from the first whistleblower.
The second whistleblower said much of the information provided to the SEC by the first whistleblower was supplied to the first whistleblower by the second whistleblower.
With the $22 million payout, the SEC has handed out approximately $276 million in awards to whistleblowers in fiscal year 2021, continuing to add to a record-breaking total.
The SEC has awarded approximately $838 million to 156 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
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