Blog

SEC rewards whistleblower

Here’s a press release worth noting if only, paradoxically because it does not provide many details. Some of what is not said is very important and some of what is said is also important. The S.E.C. did the most it could by this particular whistleblower even though that meant the agency obviously would earn less publicity for its successful action.

The press release is short on facts. In the who, what, where department we have very little to jump up and down about; but this action still represents an important advance in the protection of and the rewards to whistleblowers.

First examine this paragraph:

“The award recipient, who does not wish to be identified, provided significant information that allowed the SEC to quickly open an investigation and obtain emergency relief before additional investors were harmed. By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal an identity.”

So there. The SEC certainly knows who the whistleblower is and surely could benefit from greater publicity by saying who it is. They did not accompany the release with a discussion of the specific fraud involved, which would have increased the profile of the case but also might have made it possible for people to track the award back to the whistleblower. They apparently are acting as cautiously as possible to help protect that whistleblower.

There’s a lot of complaining about how agencies do their jobs, but I have to support and highlight this action. The whistleblower may have a lot of reasons, very good reasons, to want to stay anonymous to the world. It could be very difficult to continue to pursue a career in finance if identified as a whistleblower. This whistleblower can go about earning a living without the world knowing what happened.

This sentence also caught my eye:

“The award amount represents 30 percent of the money collected by the SEC in the successful enforcement action, the maximum permitted by law.”

Wow. Now I know in the grand scheme of securities fraud $150, 000 is not a huge amount of money. It might qualify as a tip at a Christmas party for certain Wall Street firms. There are certain guidelines the S.E.C. is supposed to follow when determining how much to award a whistleblower.

Here’s a copy of the order the S.E.C. used to notify the amount awarded and it cites to all the right rules but provides little detail—again to protect the whistleblower’s identity.

No matter what rules the Commission is to follow, it did not necessarily have to award the highest percentage under law. The message could not be clearer. The SEC wants to work with and protect whistleblowers. All the Public Relations statements in the world do not add up to this. In this case, actions speak louder than words. The actions being: a government agency, doing everything it can to protect the whistleblower and reward the whistleblower.

There have been thousands of tips provided to the SEC as a result of the new Dodd-Frank Legislation and few awards so far. That is to be expected given how new the legislation is and how long it usually would take to enter into an enforcement action and actually obtain money as a result.

This payment and this result makes clear, however, that the S.E.C. wants to work with whistleblowers, wants more tips, and values the contribution that only those who can bring real, useful information to the table.

This is good news for financial whistleblowers.