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SEC issues two separate whistleblower awards totaling over $3.75 million
On September 1, the SEC announced a joint award of $2.5 million to two whistleblowers for providing a tip “based largely on highly probative independent analysis of a public company’s filings,” which led to “several successful enforcement actions.” According to the redacted order, (i) the tip was the “underlying source that formed the basis” for the enforcement action; and (ii) the whistleblowers provided “substantial, ongoing assistance,” helping to focus the investigation and conserve the SEC’s time and resources.
Additionally, on August 31, the SEC announced a $1.25 million award to a whistleblower in connection with a successful enforcement action. According to the SEC’s press release, the whistleblower provided “significant information,” which “prompted the agency to initiate a cause examination and bring an enforcement action” resulting in “millions of dollars” being returned to harmed investors. The redacted order states that (i) the whistleblower “expeditiously alerted” the SEC to the potential wrongdoing; and (ii) there was “high law enforcement interests” in the information provided.
These press releases also noted that as of September 1, the SEC has awarded 92 individuals a total of approximately $510 million in whistleblower awards since its first award in 2012.
CFTC awards $9 million to whistleblower
On July 27, the CFTC announced an approximately $9 million whistleblower award to a claimant who reported “specific, credible and timely” information that led to a successful Commodity Exchange Act (CEA) enforcement action. The associated order notes that the claimant voluntarily provided original information leading to the opening of an investigation and the enforcement action, and was under no “legal obligation” to provide the information. The order does not provide any other significant details about the information provided or the related enforcement action. The CFTC has awarded approximately $120 million to whistleblowers since the enactment of its Whistleblower Program under the Dodd-Frank Act, and whistleblower information has led to nearly $950 million in monetary relief.
Kraninger discusses semi-annual report and pandemic response at congressional hearings
On July 29, CFPB Director Kathy Kraninger testified at a hearing held by the Senate Banking Committee on the CFPB’s Semi-Annual Report to Congress, which covers the Bureau’s work from October 1, 2019, through March 31, 2020. (Covered by InfoBytes here.) Kraninger’s testimony identified four key areas of focus for the Bureau: (i) providing financial education resources to prevent consumer harm; (ii) implementing “clear rules of the road” to encourage “competition, increase transparency, and preserve fair markets for financial products and services”; (iii) ensuring a “culture of compliance” through supervision; and (iv) following a consistent, purposeful enforcement regime. Kraninger also highlighted Bureau efforts to address discrimination, consumer confusion regarding forbearance options under the CARES Act, and a legislative proposal that would authorize the Bureau to award whistleblowers who report federal consumer financial law violations.
During the hearing, committee members focused on, among other things, the Bureau’s response to the Covid-19 pandemic and the agency’s recent repeal of certain underwriting provisions of its 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (covered by InfoBytes here). In response to Democratic criticism regarding the repeal of the underwriting provisions, Kraninger reiterated that a Bureau analysis of the provisions in the 2017 final rule revealed it would reduce the availability of small-dollar credit “by at least 70 percent,” and denied claims that the rulemaking process had been impacted by political appointees at the agency. Additionally, Kraninger said she intends to move ahead with putting the payment provisions of the payday rule into effect and is currently “working through” a pending legal challenge to the provisions.
Democratic committee members also questioned Kraninger regarding temporary regulatory relief to mortgage servicers and other financial services companies (covered by InfoBytes here) and the Bureau’s policy statement providing Fair Credit Reporting Act and Regulation V compliance flexibility for consumer reporting agencies and furnishers during the pandemic (covered by InfoBytes here). With regard to the U.S. Supreme Court’s June ruling in Seila Law v. CFPB (covered by a Buckley Special Alert), Committee Chairman Mike Crapo (R-ID) noted he is still advocating for “a bipartisan board of directors to oversee the CFPB” and for subjecting the Bureau to the annual appropriations process.
The next day, Kraninger appeared before the House Financial Services Committee’s hearing to discuss the semi-annual report. Similar to the Senate hearing, committee members questioned Kraninger on the payday rule, the revision to the HMDA rule, the Bureau’s pandemic-related initiatives for consumers, and on ways the Bureau is protecting struggling consumers during the pandemic, particularly with respect to the agency’s supervisory and enforcement work.
SEC issues $3.8 million whistleblower award
On July 14, the SEC announced a $3.8 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided significant information that helped the SEC disrupt an ongoing fraudulent scheme,” which resulted in “millions of dollars” being returned to harmed investors. The formal order also states that the information the whistleblower provided was “discrete and narrow in scope.”
As of June 14, the SEC has awarded 87 individuals a total of approximately $505 million in whistleblower awards since its first award in 2012.
District court dismisses False Claims Act suit at DOJ’s request
On July 2, the U.S. District Court for the Southern District of New York dismissed a False Claims Act suit against a British bank accused of allegedly engaging in banking practices that violated U.S. sanctions against Iran. The bank had entered into deferred prosecution agreements in 2012 and 2019 with the DOJ and agreed to pay penalties to federal and New York authorities to resolve allegations that it had facilitated U.S. dollar transactions for Iranian entities in violation of U.S. sanctions and various New York and federal banking regulations. According to the whistleblower’s suit, the bank mislead the DOJ when negotiating the 2012 deferred prosecution agreement, and allegedly continued to engage in sanctions-violating conduct, “notwithstanding their representations to the [DOJ] that they had thereafter ceased doing so.” The DOJ twice declined to intervene in the case and moved to dismiss, arguing that it was “meritless” and that continuing to discovery would waste government resources. The whistleblower countered that the DOJ “failed to properly investigate its contentions,” but the court determined that this argument was “insufficient to transform the Government’s decision into one that is arbitrary and capricious.” In reaching its decision, the court determined that it did not need to adopt a specific standard, stating, “[l]ike other courts in this [d]istrict to have considered this question, the [c]ourt concludes that it need not definitively determine the appropriate standard of review to resolve this case.” According to the court, this “is because the Government has carried its burden even under the more searching. . .standard” outlined by the U.S. Court of Appeals for the Ninth Circuit in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., which requires the DOJ to identify “‘a valid government purpose’ and ‘a rational relation between dismissal and accomplishment of the purpose.’”
SEC issues two separate whistleblower awards totaling over $800,000
On June 23, the SEC announced a $125,000 award to a whistleblower in an enforcement action. According to the press release, the whistleblower’s “information and assistance helped both the SEC and another agency bring successful actions against the perpetrator of a fraudulent securities offering.” The formal order notes that the whistleblower’s information helped the SEC and another agency discover “a fraudulent scheme that preyed on a vulnerable investor community” and that the whistleblower provided assistance to the SEC and the other agency throughout the investigation.
Additionally, on June 19, the SEC announced a nearly $700,000 award to a whistleblower in an enforcement action. According to the press release, the whistleblower’s “significant information helped the agency bring a successful enforcement action that resulted in the return of money to harmed investors.” The formal order notes that the whistleblower reported the concerns internally “in an effort to remedy the conduct,” and provided ongoing assistance to the agency throughout the investigation.
These press releases also noted that as of June 23, the SEC has awarded 85 individuals a total of approximately $501 million in whistleblower awards since its first award in 2012.
CFTC awards $6 million to whistleblower for CEA action
On June 9, the Commodity Futures Trading Commission (CFTC) announced a more than $6 million whistleblower award to a claimant who reported “specific, credible and timely” information that led to a successful Commodity Exchange Act (CEA) enforcement action. The associated order notes that the claimant voluntarily provided original information leading to the opening of an investigation and the enforcement action, and was under no “legal obligation” to provide the information. The CFTC notes that while five claimants submitted whistleblower award applications to the CFTC in response to the covered action, the CFTC provided the award only to claimant one, as three of the other claimants failed to contest a preliminary determination in favor of the award to the successful whistleblower, constituting a failure to exhaust administrative remedies. The order provides limited details on the fifth claimant’s objections to the denial, but notes the CFTC determined that the claimant’s “arguments are baseless.” The order does not provide any other significant details about the information provided or the related enforcement action. The CFTC has awarded over $110 million to whistleblowers since the enactment of the Whistleblower Program under the Dodd-Frank Act, and their information has led to nearly $900 million in monetary relief.
SEC issues $50 million, whistleblower award, highest ever to one individual
On June 4, the SEC announced a nearly $50 million award to a whistleblower in an enforcement action, the largest amount ever awarded to one individual under the SEC’s whistleblower program. According to the SEC’s order, in applying the reward criteria, the SEC determined that the whistleblower (i) provided information that was “highly significant” and contained first-hand observations of misconduct that was previously unknown; (ii) laid out “in detail substantial aspects” of the misconduct and provided a roadmap for the SEC’s investigation; and (iii) provided information that helped the SEC return a significant amount of money to those harmed by the misconduct. The agency’s next largest awards were given in 2018 when the SEC awarded $50 million to two joint whistleblowers in March and $39 million to a single whistleblower in September, covered by InfoBytes here and here.
As of June 4, the SEC has awarded 83 individuals a total of over $500 million in whistleblower awards since its first award in 2012.
SEC issues $2 million whistleblower award
On May 4, the SEC announced a nearly $2 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower’s “information and assistance helped the agency bring a successful enforcement action and allowed investors to recover much of their money.” The formal order also states that the whistleblower, among other things, provided new information regarding an investigation into ongoing fraud, which informed the SEC’s need to “expeditiously seek a temporary restraining order and asset freeze to prevent further investor loss.” The whistleblower also suffered hardships.
As of May 4, the SEC has awarded 82 individuals a total of approximately $450 million in whistleblower awards since its first award in 2012.
SEC issues $18 million whistleblower award
On April 28, the SEC announced an award of more than $18 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower’s “significant information prompted an examination that resulted in an important enforcement action.” The formal order also states that the whistleblower, among other things, relayed information that alerted SEC staff to potential securities violations, and repeatedly raised concerns internally “in an attempt to immediately correct the problem,” which led to the whistleblower suffering hardships as a result. The SEC further emphasizes that the enforcement action resulted in millions of dollars being returned to retail investors.
As of April 28, the SEC has awarded 81 individuals a total of approximately $448 million in whistleblower awards since its first award in 2012.