The Securities and Exchange Commission awarded more than $14 million to a whistleblower earlier this month. The information led to an enforcement action that recovered substantial investor funds. It is the largest award made so far under the new SEC’s whistleblower program, which was established in 2011 under Dodd-Frank.
The program is meant to reward high quality original information that results in an enforcement action with sanctions exceeding $ 1 million. Awards range from 10 to 30 percent of the money collected in a case.
“While it is certainly gratifying to make this significant award payout, the even better news for investors is that whistleblowers are coming forward to assist us in stopping potential fraud in its tracks so that no future investors are harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower, in a press release. “That ultimately is what the whistleblower program is all about.”
A number of the elements of the program caused a high degree of discomfort among companies when it was launched. This award clearly signals that the SEC is determined not to be shy about putting it to work. In my experience, fear is best conquered by action, so take some time and review your company’s compliance program. Make sure it is robust. It should include clear policies and procedures for how to handle complaints internally. Again, most importantly, the tone from the top should signal zero tolerance for violations. Then sleep soundly.
As always, if you have questions or comments, please call, e-mail or tweet me @Bettina Eckerle.
Eckerle Law offers legal advice in a variety of transactional and regulatory matters and serves companies’ plenary business law needs. Its founder, Bettina Eckerle, is a veteran of Debevoise & Plimpton and Wachtell, Lipton, Rosen & Katz. She also served as the General Counsel of two companies en route to IPO. Please visit the Eckerle Law website for more details.