More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
The Securities and Exchange Commission (SEC) announced Tuesday that it has given out its first whistleblower award to an individual who helped the agency stop a multimillion-dollar fraud.
The award recipient, who asked the agency for anonymity, will receive $50,000, the first payout from the SEC’s program to reward people who provide evidence of securities fraud.
“The whistleblower program is already becoming a success,” said SEC Chairwoman Mary Schapiro, in a statement announcing the reward. “We’re seeing high-quality tips that are saving our investigators substantial time and resources.”
The award winner provided documents and other significant information that allowed the SEC’s investigation to move at an accelerated pace and prevent the fraud from ensnaring additional victims, the agency said. The whistleblower’s assistance led to a court ordering more than $1 million in sanctions, of which approximately $150,000 has been collected thus far. The SEC said the court is considering whether to issue a final judgment against other defendants in the matter. “Any increase in the sanctions ordered and collected will increase payments to the whistleblower,” the SEC said.
Robert Khuzami, director of the SEC’s Division of Enforcement, said in the same statement that the whistleblower “provided the exact kind of information and cooperation we were hoping the whistleblower program would attract. Had this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”
The SEC did not approve a claim from a second individual seeking an award in this matter because the information provided did not lead to or significantly contribute to the SEC’s enforcement action, as required for an award.
The Dodd-Frank Act authorized the whistleblower program to reward individuals who offer high-quality original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered. Awards can range from 10% to 30% of the money collected.
Dodd-Frank included enhanced anti-retaliation employment protections for whistleblowers and provisions to protect their identity. The law specifies that the SEC cannot disclose any information, including information the whistleblower provided to the SEC, which could reasonably be expected to directly or indirectly reveal a whistleblower’s identity.