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  • District Court finds that investors qualify for SEC whistleblower protections

    Courts

    On July 21, the U.S. District Court for the Southern District of New York ruled that the SEC’s whistleblower protection rule extends to investors. In June 2020, a Nevada-based company and its owner (collectively, “defendants”) filed a motion to dismiss, strike portions of, and enter judgment on the pleadings of an amended complaint filed by the SEC which alleged, among other things, that the defendants violated Rule 21F-17 of the Securities Exchange Act. Rule 21F-17 “prohibits any ‘person’ from taking ‘any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.’” The defendants argued that the SEC’s rulemaking authority extends only to “whistleblower-employees,” claiming they “were not in an employer-employee relationship with those individuals whom the SEC claims were impeded (that is, investor-victims),” and objected to a magistrate judge’s report and recommendation (R&R) “as it relates to the SEC’s claim for impermissible impeding of Rule 21F-17 in violation of the Exchange Act.” The SEC countered that “Section 21F is not limited to protecting whistleblowers in the employee-employer relationship, and as such, Rule 21F-17’s application to any ‘person’ is a proper exercise of its rulemaking authority.”

    On review, the court sided with the SEC in finding that Section 21F broadly defines “[w]histleblower” as “any individual who provides . . . information relating to a violation of the securities laws” to the SEC, ruling that Rule 21F-17 “falls squarely within the SEC’s statutory authority to issue ‘necessary and appropriate’ regulations to implement Section 21F of the Exchange Act.” The court further held that “[w]hile certain portions of Section 21F provide anti-retaliation protections specific to those whistleblowers who are employees, nothing in the statute’s text nor the supporting documents indicates that Congress intended to protect only those whistleblowers who are employees.”

    Courts SEC Whistleblower Securities Exchange Act

  • SEC announces whistleblower awards totaling approximately $4 million

    Securities

    On July 21, the SEC announced that it awarded a whistleblower approximately $3 million for providing information that, according to the redacted order, led to a successful SEC enforcement action. The SEC noted that the whistleblower helped open the investigation and conserved resources by giving valuable information and ongoing assistance, such as providing documents that helped staff understand key components in the investigation.

    Earlier on July 15, the SEC announced that it awarded a whistleblower more than $1 million for providing information that, according to the redacted order, also led to a successful SEC enforcement action. The SEC noted that the whistleblower helped conserve significant staff time and resources by giving valuable information and ongoing assistance, such as participating in interviews with enforcement staff, and providing documents that helped staff understand key components in the investigation.

    The SEC has awarded approximately $942 million to 186 individuals since issuing its first award in 2012.

    Securities SEC Whistleblower Enforcement Investigations

  • SEC awards $1 million to whistleblower

    Securities

    On June 24, the SEC announced that it awarded a whistleblower more than $1 million for providing information that, according to the redacted order, led to multiple successful SEC enforcement actions. The SEC noted that the whistleblower provided valuable information and ongoing assistance, participated in interviews with enforcement staff, and helped staff understand key players in the investigation. The whistleblower also helped conserve significant staff time and resources by providing information that was otherwise inaccessible to staff and suffered personal and professional hardships. The SEC added that there was also “substantial law enforcement interest in the information.”

    The SEC has awarded approximately $938 million to 179 individuals since issuing its first award in 2012.

    Securities SEC Enforcement Whistleblower Investigations

  • SEC issues whistleblower awards totaling nearly $5.3 million

    Securities

    On June 21, the SEC announced whistleblower awards to four individuals totaling nearly $5.3 million for information provided in separate enforcement actions. According to the first redacted order, the SEC awarded a whistleblower nearly $4 million for voluntarily providing original information to the Commission, leading to a successful enforcement action. The whistleblower also “provided extraordinary assistance,” participated in interviews, identified key witnesses, and provided documents to staff which led to a successful enforcement action. In the second redacted order, the SEC awarded three individuals a total of approximately $1.3 million. The first whistleblower, who received the largest award, provided substantial ongoing assistance that “saved the Enforcement staff considerable time and resources.” The other two whistleblowers provided important information concerning misconduct but did not provide any investigative leads.

    The SEC has awarded approximately $937 million to 178 individuals since issuing its first award in 2012.

    Securities Whistleblower Enforcement Investigations SEC

  • SEC awards $3 million in whistleblower awards

    Securities

    On June 14, the SEC announced whistleblower awards to two individuals totaling an initial combined payment of approximately $3 million for information and assistance provided in a successful enforcement action. According to the redacted order, the SEC awarded the first whistleblower for providing assistance early in the investigation and helping enforcement staff focus its resources and theories. The second whistleblower was rewarded for helping to uncover misappropriated funds and fraudulent transfers. The SEC noted that both whistleblowers provided ongoing assistance in the investigation, including participating in interviews and providing helpful documents involved in the investigations.

    The SEC has awarded approximately $932 million to 172 individuals since issuing its first award in 2012.

    Securities Whistleblower Enforcement Investigations SEC

  • SEC awards $27 million in whistleblower awards

    Securities

    On June 2, the SEC announced whistleblower awards to two individuals totaling nearly $23 million for information and assistance provided in multiple successful enforcement actions. According to the redacted order, the SEC awarded the first whistleblower nearly $13 million for submitting a whistleblower tip that led to the initiation of the investigations. The second whistleblower received approximately $10 million for submitting a tip that contributed to the investigation, but according to the SEC, the whistleblower “unreasonably delayed by waiting several years to report the conduct.” The SEC noted that both whistleblowers provided substantial voluntary assistance in the investigation, including participating in interviews and identifying key individuals and systems involved in the investigations.

    Earlier on May 27, the SEC announced that it awarded a whistleblower more than $4 million for voluntarily providing information that prompted the SEC to open an investigation leading to a successful enforcement action. According to the redacted order, the whistleblower provided substantial information to SEC investigative staff, identified key players, provided helpful information and documents, and cooperated with investigative staff. The SEC, however, determined a second claimant to be ineligible for an award, concluding, among other things, that the claimant “provided no information that was used in or otherwise contributed to the Covered Action” nor any “unique information or insight,” which would have led to the success of the enforcement action.

    The SEC has awarded more than $928 million to 166 individuals since issuing its first award in 2012. 

     

    Securities Whistleblower Enforcement SEC Investigations

  • SEC issues $59 million in whistleblower awards

    Securities

    On May 19, the SEC announced that it awarded a whistleblower more than $28 million for providing information that, according to the redacted order, prompted the SEC and another agency to open investigations that resulted in significant enforcement actions. The SEC notes that under its whistleblower program, individuals who provide information to other agencies “may be eligible for an award in the related action if they are also eligible for an award in the underlying SEC action.”

    Earlier, on May 17, the SEC announced whistleblower awards to four individuals totaling nearly $31 million for information provided in two different enforcement actions. According to the first redacted order, the SEC jointly awarded nearly $27 million to two claimants who voluntarily provided new information and ongoing assistance throughout an investigation that led to successful enforcement actions. In the second redacted order, the SEC awarded two other whistleblowers a total of approximately $3.8 million. The first whistleblower received a roughly $3.75 million award for voluntarily providing “original information to the Commission that contributed to an existing investigation” that led to a successful enforcement action. The second whistleblower received approximately $750,000 for providing “information that the staff previously lacked and that was useful in negotiating a settlement of one of the proceedings.” Though both whistleblowers independently provided information that was relevant in the ongoing investigation, the whistleblower who received the larger award supplied information and assistance that was more significant to the enforcement action.

    The SEC has awarded approximately $901 million to 163 individuals since issuing its first whistleblower award in 2012.

    Securities Whistleblower Enforcement SEC

  • SEC issues more than $25.6 million in whistleblower awards

    Securities

    On May 12, the SEC announced a whistleblower award totaling around $3.6 million in connection with a successful enforcement action. According to the redacted order, the whistleblower provided new information that lead to the initial charges as well as “ongoing assistance as the Commission’s investigation progressed.”

    Earlier on May 10, the SEC also announced whistleblower awards totaling approximately $22 million in connection with a successful enforcement action. According to the redacted order, the SEC awarded a whistleblower approximately $18 million for providing (i) information that led to the opening of the investigation brought against a financial services firm, and (ii) ongoing assistance during the investigation. The second whistleblower received a $4 million award for submitting information after the investigation began. The SEC noted that both whistleblowers provided information and cooperation that “allowed the Commission to better understand complex transactions related to the matters under investigation.”

    The SEC has awarded approximately $842 million to 157 individuals since issuing its first award in 2012.

    Securities Whistleblower SEC Enforcement

  • SEC issues over $3 million in whistleblower awards

    Securities

    On April 23, the SEC announced whistleblower awards totaling more than $3 million in two separate enforcement actions. According to the first redacted order, the SEC awarded a whistleblower approximately $3.2 million for alerting enforcement staff to violations, identifying key issues for staff to focus on, and providing a “roadmap” for staff that conserved resources. However, the SEC noted that the whistleblower “unreasonably delayed” reporting the information to the Commission—it was submitted approximately four years after the date on which the whistleblower first noticed the misconduct—during which “investors continued to suffer harm.”

    In the second redacted order, the SEC awarded a whistleblower more than $100,000 for providing information (of which “there was substantial law enforcement interest”) that assisted the Commission’s investigation and “was one of the underlying sources that formed the basis for the charges in the Covered Action.” The SEC noted that the whistleblower provided helpful assistance and suffered personal and professional hardships as a result.

    Securities Whistleblower Enforcement SEC Investigations

  • SEC awards $50 million to whistleblower

    Securities

    On April 15, the SEC announced an award of more than $50 million to joint whistleblowers in connection with violations that involved highly complex transactions that would have been difficult to detect without their information. According to the redacted order, the joint whistleblowers “assistance was critical to staff’s ability to identify and investigate the unlawful securities violations,” including meeting with staff numerous times and providing voluminous detailed documents, which led to the return of tens of millions of dollars to harmed investors.

    The SEC has now awarded approximately $812 million to 151 individuals since it issued its first award in 2012.

     

    Securities SEC Whistleblower Enforcement

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