Whistleblower in SEC Enforcement Action Receives $14 Million Award

November 20, 2013 — The Securities and Exchange Commission (SEC) has awarded over $14 million to a whistleblower who notified the agency about a scam against investors in the securities industry. Based on information provided by the tipster, the SEC was able to recoup substantial funds for investors. This is the largest award made thus far since the SEC’s whistleblower program began in 2011.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 created the whistleblower program to protect investors from fraud in the securities industry. Under the program, tipsters notify the SEC about securities fraud schemes when they are discovered, thereby allowing the agency to move swiftly before other investors are hurt.

The Office of the Whistleblower provides rewards for informants with knowledge of securities fraud who relay original information leading to an SEC enforcement action that recovers sanctions topping $1 million. The size of the reward varies from ten to thirty percent of the amount the government collects. Payments to whistleblowers come from a fund set up by the Dodd-Frank Act. Rewards do not reduce amounts paid to wronged investors.

The whistleblower in the case wishes to remain anonymous. The SEC is required to protect tipsters’ confidentiality and is not permitted to disclose information that might give away the identity of an informant who wants to maintain anonymity.

The whistleblower in this case provided original information that the SEC relied on to conduct a thorough investigation on an expedited basis. In less than six months from the time the tip was received, the agency brought an enforcement action and secured investor funds.

The SEC made its first whistleblower reward in August 2012 in the amount of $50,000. In 2013, three whistleblowers received a reward in a case involving a phony hedge fund. Once that case is finally resolved, the ultimate total payout will likely be more than $125,000.

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