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Tuesday
Jul252017

SEC announces $2.5 million whistleblower award to government employee

The SEC Tuesday awarded nearly $2.5 million to an employee of a domestic government agency.

The whistleblower's tip "helped launch an SEC investigation and whose continued assistance enabled the SEC to address a company's misconduct," the SEC said.

The agency didn't identify the whistleblower, his or her employer, or the company involved.

By law, the SEC protects the confidentiality of whistleblowers and doesn't disclose information that might reveal who they are.  

In Tuesday's award order (pdf), the SEC said:

Generally speaking, an employee of a federal, state, or local government agency can -- subject to the two statutory exceptions discussed below -- be eligible for an award under our whistleblower program.

The first exception prohibits paying a whistleblower award to an employee of “an appropriate regulatory agency.” Exchange Act § 21F(c)(2)(A)(i), 15 U.S.C. § 78u-6(c)(2)(A)(i).

Exchange Act Rule 21F-4(f) defines an “appropriate regulatory agency” as certain banking agencies, including the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation.

"This exception has no potential application to Claimant given the governmental authority at which Claimant worked," the SEC said Tuesday.

The second exception prohibits an award to an employee of “a law enforcement organization.”

The whistleblower rules don't define “law enforcement organization.”

But the SEC Tuesday said "the term is generally understood as having to do with the detection, investigation, or prosecution of potential violations of law."

The SEC said "certain components of Claimant’s governmental employer have law enforcement responsibilities, but those responsibilities are housed in a separate, different component of the agency at which Claimant works."

The SEC also noted that "this is not a situation where a claimant sought to circumvent the potential responsibilities that his or her government agency might have to investigate or otherwise take action for the misconduct."

Tuesday's whistleblower award was apparently the first by the SEC to a government employee.

Jane Norberg, chief of the SEC's Office of the Whistleblower, said: ''This whistleblower not only helped us open the case, but also provided timely ongoing assistance along with critical documents and testimony that accelerated the pace of our enforcement action.''

The SEC has now awarded $156 million to 45 whistleblowers since the first award in 2012.

Whistleblowers can be eligible for an award when they voluntarily provide the SEC with "unique and useful" information that leads to a successful enforcement action.

Awards can range from 10 percent to 30 percent of the money collected when the penalties and sanctions exceed $1 million.

The SEC received about 4,000 tips in the latest reporting year and more than 14,000 since the whistleblower award program started. Tips have come from individuals in all 50 states and the District of Columbia and 95 foreign countries.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.