SEC whistleblower payouts top US$1-billion mark

By James Langton | September 15, 2021 | Last updated on September 15, 2021
2 min read
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After a massive new award, the U.S. Securities and Exchange Commission (SEC) has now paid over US$1 billion to whistleblowers who tip the agency to suspected securities violations.

The SEC announced a pair of whistleblower awards, including the second-largest payout on record (US$110 million), that pushed its program past the $1-billion mark. It has now paid awards to 207 tipsters since issuing its first award in 2012. The largest award was over $114 million in October 2020.

With the two largest payouts on record coming in its current fiscal year (which ends Sept. 30), the agency has paid out over US$500 million in the year — half the total awarded since the program was founded.

“Today’s announcement underscores the important role that whistleblowers play in helping the SEC detect, investigate and prosecute potential violations of the securities laws,” said SEC chair, Gary Gensler, in a release.

“The assistance that whistleblowers provide is crucial to the SEC’s ability to enforce the rules of the road for our capital markets.”

The head of the SEC’s enforcement division, Gurbir Grewal, said, “We hope that today’s announcement encourages whistleblowers to continue to come forward with credible information about potential violations of the securities laws.”

Today’s near-record payout is comprised of a US$40-million award stemming from an SEC enforcement action and US$70 million due to a related action by another agency, based on “significant independent analysis” that informed both investigations.

In its order, the SEC said the tipster “utilized publicly available information in a way that went beyond the information itself and afforded the commission with important insights into the extent of [the company’s] misconduct as well as other relevant conduct.”

The tipster’s information “was derived from multiple sources that were not readily identified and accessed by members of the public without specialized knowledge, unusual effort or substantial cost,” it said, noting that their work “raised a strong inference of securities law violations that was not otherwise reasonably inferable from any of the sources individually.”

A second whistleblower was paid US$4 million in connection with the voluntarily provision of original information to the SEC, yet this information came after the regulator had already advanced its investigation.

“Whistleblowers can play an extraordinary role in helping the SEC ferret out wrongdoing,” said Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower.

“Whistleblowers may provide critical information based on their own independent analysis that facilitates the SEC’s investigation and the successful resolution of the enforcement action.”

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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.