Compliance Officer Receives SEC Whistleblower Award

A whistleblower who provided information to the U.S. Securities and Exchange Commission (SEC) will receive a financial whistleblower award of between $1.4 million and $1.6 million, according to a press release issued yesterday by the SEC.  The Commission announced it will present the whistleblower award to an anonymous compliance officer “who had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.”  Once again, the whistleblower and the company sanctioned went unnamed in the SEC’s announcement, reflecting the SEC’s commitment to protecting the anonymity of whistleblowers who do not wish to disclose their identities, and thereby incentivizing future SEC whistleblowers with concerns about anonymity.

Congress created the SEC whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  Section 922 of the Dodd-Frank Act grants the SEC the authority to issue awards to whistleblowers of between 10 to 30 percent of any monetary recovery exceeding $1 million that the SEC obtains from an offending party through enforcement actions that came about as a result of original information provided by the whistleblower.

The SEC’s award marks the second such award issued to an employee with responsibilities for internal audit or compliance.  As explained by Andrew Ceresney, Director of the SEC’s Division of Enforcement,  “When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC.  This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”