On July 17, 2024, the U.S. Securities and Exchange Commission announced a whistleblower award of more than $37 million. The whistleblower had sought an even larger award, but the SEC determined that $37 million was the appropriate amount, in large part because the SEC’s investigation began because of a referral from the SEC Division of Examinations, and not the whistleblower’s information, according to the SEC.
In determining whether to grant a whistleblower award, and at what percentage of the monetary sanctions to fix the award, the SEC considers the factors enumerated in Rule 21F-6 of the Securities Exchange Act of 1934 (17 C.F.R. § 240.21F-6). These factors include the significance of the information provided by the whistleblower, the amount of assistance provided by the whistleblower, the law enforcement interest in deterring violations, delays in reporting, the whistleblower’s culpability, and whether the whistleblower interfered with or participated in internal compliance and reporting systems.
The SEC found that the whistleblower, after reporting his or her concerns internally, had voluntarily provided original information that led to a successful enforcement action. The SEC also determined that the whistleblower’s information helped advance an enforcement action that led to the return of tens of millions of dollars to investors.
However, the SEC disagreed with the whistleblower’s assertion that his or her tip caused the SEC to initiate the covered action. Instead, as explained by the SEC, the Division of Examinations opened and conducted an exam, and the whistleblower’s information had no effect on the decision to conduct an exam nor the scope of the exam. Moreover, according to the SEC, it was the Division of Examination’s referral to the SEC Enforcement staff that led to the opening of a Matter Under Inquiry, at which point, the Enforcement staff reviewed the whistleblower’s information.
The SEC agreed that the whistleblower’s information significantly contributed to the success of the enforcement action, but concluded that, all factors considered, the percentage of the total monetary sanctions awarded to the whistleblower, resulting in an award of more than $37 million, was appropriate.