On December 19, 2022, the US Securities and Exchange Commission announced a $37 million award to a whistleblower whose original information led to a successful SEC enforcement action and a related action brought by another government agency. Specifically, the SEC stated that the whistleblower received more than $29 million for his/her assistance to the SEC and more than $8 million for the assistance provided to the unnamed government agency.
According to the SEC, the claimant was a company outsider who submitted a tip to the SEC. Based upon the SEC Order, this tip did not cause the initiation of an SEC investigation that lead to a “successful” enforcement action. Rather, approximately six months after submitting the tip to the SEC, the whistleblower provided substantially the same information to the company. Within 120 days of emailing the company, the claimant also submitted to the SEC the email he/she sent to the company. In response to the submitted allegations, the company launched an internal investigation, and reported the allegations to the SEC, which then opened an investigation.
Given these facts, under Rule 21F-4, in order for an individual to qualify for an award, four requirements must be met. First, the claimant must submit original information to an entity before or at the same time that it is reported to the SEC. Second, the information must be submitted to the SEC within 120 days of the submission to the company. Third, the entity must provide the whistleblower information or the results of an investigation initiated because of the whistleblower tip to the SEC. Fourth, that information must lead to a “successful enforcement” action.
Because the claimant in this case provided information to the SEC first (and that information did not prompt the opening of an investigation that led to a successful enforcement action), the claimant did not technically qualify for an award under Rule 21F-4. However, the SEC waived the requirement that the tip be provided to the company before or at the same time as the SEC because the whistleblower made “persistent efforts to bring the conduct to the attention” of the SEC and the company. According to the SEC, those efforts were consistent with the “principal objective of Rule 21F-4(c)(3),” which is “to encourage internal reporting, thereby allowing a company the opportunity to address the conduct.” Given this, the SEC determined that it was “in the public interest” to grant the awards to the claimant.
Since the SEC whistleblower program began in 2012, the SEC has issued more than $1.3 billion in rewards to whistleblowers.