May 16, 2021

SEC awards $22 million to contentious whistleblowers

On May 10, 2021, the US Securities and Exchange Commission (SEC) announced that it had granted a collective $22 million to two claimants whose information and assistance led to successful SEC enforcement actions against a financial services firm.  The SEC awarded the first claimant $18 million and the second claimant $4 million.  The first claimant received a larger reward  because this claimant was the initial source of the investigation and because the second claimant did not provide information until several years later (which the SEC determined represented an “unreasonable reporting delay” justifying a reduction in the second claimant’s award).

According to the SEC Order, both claimants contested the SEC’s initial award allocation.  The first claimant argued that the second claimant had not provided any “new, original information” to support the SEC’s investigation, but had instead only confirmed information previously provided by the first claimant, and as a result the first claimant deserved the entire award.  The second claimant argued that the allocation should be more equitable because only the second claimant had first-hand knowledge of certain issues relevant to the investigation, and because the second claimant provided information on a “much graver issue” than the topics about which the first claimant provided information.  The second claimant also asserted that the award reduction was unjustified because, during the relevant time period, the second claimant had provided significant information to the first claimant which the first claimant had passed on to the SEC.
The SEC acknowledged that the second claimant had in fact provided the first claimant with relevant information for the first claimant to pass on to the SEC, but explained that it had already accounted for this by reducing the second claimant’s award “by a smaller amount than [it] otherwise might have.”  The SEC otherwise rejected both claimants’ arguments, and confirmed its original award amounts.

SEC Press Release | SEC Order