On December 14, 2020, the US Securities and Exchange Commission awarded approximately $300,000 to a whistleblower who obtained significant information while performing his/her “audit-related responsibilities” and voluntarily provided that information to the SEC, resulting in a successful SEC enforcement action.
In order to be eligible for a whistleblower award, Rule 21F-4(b)(1), promulgated under the Securities Exchange Act of 1934, requires claimants to provide “original information.” Original information must be derived from the claimant’s “independent knowledge” or “independent analysis.” Under Rule 21F-4(b)(4)(iii)(B), information obtained by someone performing compliance or internal audit duties is, by rule, not considered to be derived from independent knowledge or independent analysis. However, if the claimant has a “reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of the misconduct,” such information can constitute original information. In this instance, the SEC determined that the claimant had such a reasonable basis, though the portion of the order describing the reasonable basis is redacted.
The order also states that the claimant met with the SEC staff more than twelve times, identified potential witnesses, “aggressively” worked to remediate the misconduct, and “suffered a unique hardship.” The unique hardship is described in the order, but the relevant text has been redacted.
As the SEC noted in its press release, this is only the fourth time since the whistleblower program’s inception that the SEC has issued an award to a whistleblower with compliance or internal audit-related responsibilities.
The SEC has awarded over $731 million to 124 individuals since 2012.