The Securities and Exchange Commission (SEC) whistleblower program began in 2012. Since that time, awards handed out have increased slowly, but steadily. Now, in it's third year, the largest SEC whistleblower award has been handed out, to the tune of $30 million.
The purpose of the SEC whistleblower program is to encourage people with knowledge of securities fraud, to come forward with evidence that regulators may not have otherwise discovered. According to the SEC, the program, "allows the Commission to minimize the harm to investors, better preserve the integrity of the United States' capital markets, and more swiftly hold accountable those responsible for unlawful conduct."
In this recent case, the whistleblower, who lives outside the US, provided information in an enforcement action that the SEC had not identified. This is the fourth award to a foreign SEC whistleblower. Chief of the SEC's Office of the Whistleblower, Sean McKessey, "whistleblowers from all over the world should feel...incentivized to come forward with credible information about potential violations of the US securities laws."
Last year, the SEC's whistleblower program fielded tips from people in the US and 55 foreign countries, those making up 12 percent of the tipsters. According to Director of SEC's enforcement division, Andrew Ceresney, "this record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement."
Authorized by Congress, the Commission provides monetary awards who come forward with high-quality information that leads to an enforcement recovery of over $1 million. Typically, SEC whistleblowers can be awarded between 10 to 30 percent of the money collected. The program, authorized in 2010, came on the heels of the Bernie Madoff scandal, after the SEC failed to act on a detailed tip that Madoff was operating his fraudulent scheme. To date, the program has awarded 14 whistleblowers with millions of dollars for their assistance.
According to some critics, the whistleblower program will not do much to clean-up corporate fraud. Because the SEC's reports regarding these whistleblower awards are so heavily redacted to protect the anonymity of the individuals reporting the fraud, there is little for those in risk management and compliance to learn from these cases.
Shanti Atkins, writing for a Forbes post, argued the SEC's announcement is "jaw-dropping," with "no guidance or learnings for those organizations who want to get it right." There was no information regarding the company's internal reporting process, compliance program, training, monitoring, or even if they had external monitors. Atkins further argues that the massive size of this award will result in a higher number of tips, submitted by "bounty hunters," and that the volume of tips will increase the number of dead ends.
However, others believe the program is working. Gordon Schnell, a lawyer with Constantine Cannon of New York, found that this record-breaking tip is a sign that the program is working. Additionally, the attorney representing the $30 million whistleblower found the SEC to be very responsive, which spoke to the strength of the program. According to Schnell, "how do you find out what's going on in these places without the help of insiders?"