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SEC Gives First Whistleblower Award to Former Company Officer

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The Securities and Exchange Commission said Monday that it has awarded its first whistleblower payout to a former company officer.

The former officer was awarded a whistleblower payout between $475,000 and $575,000 for reporting original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.

Officers, directors, trustees or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program, the agency says.

However, an exception exists when an officer reports the information to the SEC more than 120 days after other responsible compliance personnel who possessed the information failed to adequately address the issue. 

“Corporate officers have front-row seats overseeing the activities of their companies, and this particular officer should be commended for stepping up to report a securities law violation when it became apparent that the company’s internal compliance system was not functioning well enough to address it,” said Andrew Ceresney, director of the SEC’s Division of Enforcement, in a statement. 

“Receiving information and cooperation from company insiders is particularly useful in the early detection of securities fraud, and we will continue to leverage whistleblower information to help combat securities law violations and better protect investors and the marketplace,” added Sean McKessy, chief of the SEC’s Office of the Whistleblower, in the statement. “Meanwhile, companies must have rigorous internal compliance programs that adequately address and remedy potential violations voiced by their employees as well as by their officers, directors, or other individuals.”

The SEC has awarded 15 whistleblowers since its whistleblower program began more than three years ago, with payouts totaling nearly $50 million out of an investor protection fund established by Congress. 

Whistleblower awards can range from 10% to 30% of the money collected in a case. 

— Check out NY Attorney General Floats Whistleblower Incentive Bill on ThinkAdvisor.


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