A compliance officer at an unnamed firm received an award of more than $1 million for providing the U.S. Securities and Exchange Commission (SEC) insider tips about fraudulent practices and other misconduct that led to a successful enforcement action, the agency said.
According to the SEC’s Office of the Whistleblower, the compliance officer stepped forward with tips in an effort to prevent “imminent misconduct” from causing substantial financial harm to the company and its investors.
Protecting whistleblowers can be tricky when the tips come from professionals whose job it is to monitor corporate activity for compliance with federal rules and regulations. However, compliance professionals are protected by SEC whistleblower rules and can receive rewards in certain cases.
“When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.
“This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it,” Mr. Ceresney said.
Awards to whistleblowers whose tips result in a successful SEC enforcement action with sanctions of more than $1 million range from 10 percent to 30 percent of the money collected. In this case, the whistleblower will receive between $1.4 million and $1.6 million.
Because federal law mandates that the SEC protect the whistleblower’s confidentiality, the agency does not disclose the name of the whistleblower or any other information that might reveal his or her identity.
Since it was established about three years ago, the SEC’s whistleblower program has paid more than $50 million to 16 whistleblowers. All whistleblower reward payments are made out of an investor-protection fund established by Congress, which is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money is taken or withheld from investors to pay whistleblower awards.