The SEC announced that it had paid $400,000 to a whistleblower who brought information to the commission. In a unique turn of events, the SEC initially denied the whistleblower’s award claim, stating that although his or her information led to a successful enforcement action, the whistleblower’s information “did not appear to have been voluntarily provided…because of a prior inquiry into the matter conducted by a self-regulatory organization (“SRO”).” The whistleblower, however, successfully appealed the SEC’s determination and was awarded $400,000.

According to the SEC, the whistleblower provided facts that he or she had “work[ed] aggressively internally…to bring the securities law violations to the attention of the appropriate personnel and to obtain corrective action for the benefit of investors.” Although the SRO inquiry occurred before the whistleblower filed his or her report to the commission, the whistleblower provided the SEC with a detailed chronology that showed his or her internal efforts to obtain corrective actions, revealed that the third party’s tip to the SRO that kicked off the inquiry credited him or her with identifying the problem, and demonstrated that he or she reported to the SEC after learning that incomplete information had been provided to the SRO, causing the SRO to close their inquiry and leaving investors at risk. The SEC decided to waive the “voluntary’ requirement, “[b]ased on our fuller understanding of the relevant events, which we consider to be materially significant extenuating circumstances.”

Read the SEC Press Release, “SEC Announces Award for Whistleblower Who Reported Fraud to SEC After Company Failed to Address Issue Internally”
Read the SEC Order