SEC awards whistleblowers $3 million despite failure to satisfy "voluntary" requirement

On June 3, 2019, the US Securities and Exchange Commission announced an award of $3 million to two whistleblowers for submitting information to the SEC that led to a successful enforcement action.  Under SEC rules, to receive a reward, a whistleblower must voluntarily provide information prior to any request for information by the SEC or other designated government regulator.  In this matter, another agency had already begun investigating the matter and had submitted a request for information to the company prior to the whistleblowers’ disclosure.  Nevertheless, the SEC exercised its discretion under the Exchange Act to waive the temporal requirement and awarded the whistleblowers $3 million.  The SEC provided four reasons for this waiver: 

  1. The whistleblowers were not informed of the information request issued by the other enforcement authority at the time they reported the information to the SEC;
  2. The whistleblowers did not learn about the other agency’s investigation until several months after reporting their information to the SEC;
  3. Although the SEC order redacts much of this reason, the non-redacted text reveals that the whistleblowers “candid discussions” led to the opening of the investigation by the other agency; and
  4. The SEC determined that if it did not waive the voluntary requirement, undue hardship and unfairness would result. 

SEC press release | SEC Order

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