SEC Issues Award to Whistleblower Regardless of Guilt and Hold-up

On July 27, 2017, the SEC revealed that it was paying a $1.7 million bounty award to a whistleblower, although the whistleblower: (1) had some fault in the scams; (2) unreasonably postponed reporting the scams; and (3) cannot adhere to a Dodd-Frank guideline needing whistleblowers to send details in composing in specific situations. The SEC did not supply the identity of the whistleblower or the company at issue.

In its Order, the SEC composed that in figuring out a suitable award portion, it stabilized that the whistleblower notified it to major multi-year scams that would have otherwise been hard to identify with the whistleblower’s unreasonable hold-up and guilt. The SEC kept in mind that the whistleblower’s unreasonable hold-up was rather alleviated because he initially signaled the SEC to the scams before the whistleblower program and the defenses that accompany it was developed by Dodd-Frank. The SEC likewise specified that it did rule out at all the whistleblower’s failure to send his info in composing because he was actively dealing with the SEC before the enactment of Dodd-Frank and, once the Act was passed, he supplied the details in the format the SEC asked for.

The SEC likewise kept in mind that the whistleblower “bears some, albeit minimal, fault.” While Dodd-Frank avoids the SEC from granting bounties to whistleblowers who are criminally founded guilty for conduct that is the exact same as, or associated with, the conduct that is the topic of the info they offer, the SEC presently can approve awards to whistleblowers who are associated with the misdeed but are not criminally charged.

Change might be around the corner. On June 8, 2017, the United States House of Representatives passed the Financial CHOICE Act of 2017. The CHOICE Act would restrict culpable whistleblowers from getting any financial award under Dodd-Frank’s whistleblower bounty program. More particularly, it would forbid the SEC from releasing an award “to any whistleblower who is accountable for, or complicit in, the infraction of the securities laws for which the whistleblower supplied details to the Commission.” H.R. 10– Financial CHOICE Act of 2017, 115th Congress (2017– 18) § 828. It supplies that “a person is accountable for, or complicit in, an offense of the securities laws if, with the intent to promote or assist the infraction, the person–(A) obtains, causes, or triggers another person to devote the offense; (B) helps or abets another person in dedicating the offense; or (C) having a task to avoid the offense, cannot make an effort the person is needed to make.” Id. Therefore, while the whistleblower here was handed a $1.7 million award regardless of his fault, he would have been rejected an award under the CHOICE Act.

Based on the $1.7 million award here, in addition to other current awards, it appears that the SEC’s whistleblower bounty program will stay active under the Trump administration.