Tip to SEC was slow to come but still worth millions

Despite waiting to blow the whistle, a tipster is getting a multimillion-dollar reward from the U.S. Securities and Exchange Commission (SEC).

The commission announced the payment of two whistleblower awards, including a US$3.2-million payout to a tipster who alerted the regulator to apparent violations and then provided it with a “roadmap” to understanding the activity, and expertise that saved investigative resources.

At the same time, according to the SEC’s order, the whistleblower “unreasonably delayed” reporting to the commission.

It said the tipster didn’t alert the SEC for four years after first observing the conduct in question, and for 17 months after they “first understood that there could possibly be a securities law violation occurring.”

The SEC noted that, while the tipster “may not have fully understood the significance of the misconduct, investors continued to suffer harm during the period of delay.”

While the reporting delay affected the ultimate size of the award, the order also noted that the SEC was first alerted to the misconduct by the tipster, and the SEC enforcement action was largely based on that initial tip.

The SEC also announced a second whistleblower award of US$100,000 for a tipster who provided information about an ongoing fraud that was “preying on investors.”

“These whistleblowers provided new, important information that aided the SEC in learning about and understanding the violative conduct,” said Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.