Compliance Professional Awarded $300,000 by SEC

Whistleblower Came to SEC After Reporting Fraud Internally and Company Failed to Take Action

On August 29, 2014, The Securities and Exchange Commission announced a whistleblower award of more than $300,000 to a company employee who performed audit and compliance functions and reported wrongdoing to the SEC after the company failed to take action when the employee reported it internally.

It’s the first award for a whistleblower with an audit or compliance function at a company.

“Individuals who perform internal audit, compliance, and legal functions for companies are on the front lines in the battle against fraud and corruption.  They often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one,” said Sean McKessy, Chief of the SEC’s Office of the Whistleblower.  “These individuals may be eligible for an SEC whistleblower award if their companies fail to take appropriate, timely action on information they first reported internally.” 

This particular whistleblower award recipient reported concerns of wrongdoing to appropriate personnel within the company, including a supervisor.  But when the company took no action on the information within 120 days, the whistleblower reported the same information to the SEC.  The information provided by the whistleblower led directly to an SEC enforcement action.

SEC Waives Eligibility Requirement for Whistleblower, Awards $400,000

Company Failed to Address Fraud Internally

On July 31, 2014, the Securities and Exchange Commission announced an award of more than $400,000 for a whistleblower who reported a fraud to the SEC after the company failed to address the issue internally.

The whistleblower’s claim for an award was denied in the Preliminary Determination because the information did not appear to have been “voluntarily” provided within the definition of Rule 21F-4(a)(ii). However, the agency later determined that based on the relevant events, which it considered to be “materially significant extenuating circumstances,” a waiver to be “appropriate in the public interest and consistent with the protection of investors.”

This whistleblower provided the agency with specific, timely, and credible information that allowed for a more rapid investigation than otherwise would have been possible.  The whistleblower had tried on several occasions and through several mechanisms to have the matter addressed internally at the company.

“The whistleblower did everything feasible to correct the issue internally.  When it became apparent that the company would not address the issue, the whistleblower came to the SEC in a final effort to correct the fraud and prevent investors from being harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower.  “This award recognizes the significance of the information that the whistleblower provided us and the balanced efforts made by the whistleblower to protect investors and report the violation internally.”

The SEC’s whistleblower program rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.  By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal a whistleblower’s identity.