On August 31 and September 1, 2020, the US Securities and Exchange Commission announced awards to whistleblowers in two cases.
In the first case, in which the SEC awarded over $1,250,000 to a single whistleblower, the SEC treated an enforcement action against a company, and an action against an individual involved in the misconduct, as a single “covered action” within the meaning of Rule 21F-4(d) of the Securities Exchange Act of 1934, since both actions arose out of the same nucleus of operative facts. The SEC noted in its order that the claimant had expeditiously alerted the agency to the potential wrongdoing, and the claimant’s information helped the SEC bring a successful enforcement action, resulting in the return of millions of dollars to harmed investors; however, although the whistleblower’s initial information was significant and prompted the SEC to investigate, circumstances were such that the claimant was able to provide only limited assistance for the duration of the process.
In the second case, the SEC awarded $2.5 million to joint whistleblowers whose “highly probative independent analysis of a public company’s filings” led to multiple enforcement actions. According to the SEC’s order, the claimants were unaffiliated with the target company, but their analysis of publicly available information revealed possible accounting violations that prompted an investigation by the SEC, and resulted in successful enforcement actions. In this case, the SEC said that the joint claimants provided substantial, ongoing assistance that helped to focus the investigation and conserve significant time and resources. Media reports indicate that the whistleblowers are Wall Street analysts whose information led to a $14.25 million settlement with Orthofix International and four of its executives in 2017, resolving charges by the SEC and the US Department of Justice that the company improperly booked revenue and made improper payments to doctors in Brazil, in violation of the Foreign Corrupt Practices Act.
Proposed amendments to the rules governing whistleblower awards, if approved by the SEC, would allow an upward adjustment of awards up to $2 million, subject to statutory limitations.