How an SEC Whistleblower Can Significantly Contribute to the Success of an Enforcement Action
Even if the SEC already has information about a particular securities law violation, a whistleblower can still qualify for an award if their information “significantly contributes” to the success of a resulting SEC enforcement action.
Our firm has successfully represented several whistleblowers that received awards for providing original information to the SEC that assisted in open investigations. Roughly 35% of SEC whistleblower awards were issued to whistleblowers that assisted the SEC with existing investigations.
A whistleblower’s information may “significantly contribute” to an enforcement action in several ways, including if the information:
- allows the SEC to bring the enforcement action in significantly less time or with significantly less resources;
- expands the scope of the current investigation, leading to additional successful claims; or
- allows the SEC to bring claims against additional parties.
Under the whistleblower rules, an individual’s original information leads to the success of an action where it causes staff to
- commence an examination,
- open or reopen an investigation, or
- inquire into different conduct as part of a current SEC examination or investigation, and the SEC brings a successful judicial or administrative action based in whole or in part on conduct that was the subject of the individual’s original information, under Rule 21F-4(c)(1) of the Exchange Act; or alternatively, where in the context of an existing investigation, the individual’s original information significantly contributes to the success of an SEC judicial or administrative enforcement action.
In determining whether an individual’s information significantly contributed to an action, the SEC considers factors such as whether the information allowed the SEC to bring the action in significantly less time or with significantly fewer resources, additional successful claims, or successful claims against additional individuals or entities. The individual’s information must have been “meaningful” in that it “made a substantial and important contribution” to the success of the covered action. Whistleblower Award Proceeding File No. 2018-6, Rel. No. 34-82897 (Mar. 19, 2018); Whistleblower Award Proceeding File No. 2016-9, Rel. No. 34-77833 (May 13, 2016).
On February 13, 2023 the SEC issued an award of $3 million to a whistleblower who provided “highly significant information to Enforcement staff during an existing investigation that helped the Enforcement staff understand the mechanics of the fraudulent offering scheme.” Whistleblower Award Proceeding File No. 2023-35, Rel. No. 96887 (Feb. 13, 2023). The whistleblower also “provided critical and substantial ongoing assistance throughout the investigation, communicating with Enforcement staff on multiple occasions that conserved time and resources and helped the Commission identify previously unknown entities and individuals involved in the fraud.”
On May 13, 2016, the SEC issued an award of more than $3.5 million to a whistleblower who “bolstered an ongoing investigation with additional evidence of wrongdoing that strengthened the SEC’s case.” Per the press release accompanying that award, Mr. Ceresney, the SEC Enforcement Director, explained that “[w]histleblowers can receive an award not only when their tip initiates an investigation, but also when they provide new information or documentation that advances an existing inquiry.” He added, “This particular whistleblower’s tip substantially strengthened our ongoing case and increased our leverage during settlement negotiations with the company.”
For more information about whistleblower rewards and bounties, contact the SEC whistleblower lawyers at Zuckerman Law at 202-262-8959. And click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:
To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:
Process to Get an SEC Whistleblower Award
Qualifying for an SEC Whistleblower Award
SEC Whistleblower Bounties
Yes, you can still qualify for an award under the program even if the SEC has an open investigation into the matter. In fact, in 2016 40% of awards were because individuals significantly contributed to an already open investigation. Individuals can do this by providing information that allows the SEC to bring the claim with fewer resources or in significantly less time. Perhaps the information allows the SEC to expand the scope of their current investigation, or if the information allows the SEC to bring claims against additional parties to the already open investigation.
