Compliance Officer Receives Whistleblower Bounty for Courageous Whistleblowing to the SEC
Today the SEC announced a whistleblower award of more than one million dollars to a compliance officer. The award is significant in that it highlights the critical role of the SEC’s Whistleblower Program in preventing harm to investors.
To be eligible for an SEC whistleblower award, a compliance officer must first report a disclosure internally and give the company an opportunity to correct the violation. The whistleblower can then disclose the information to the SEC 120 days after making an internal disclosure and will be deemed to have provided the information to the SEC as of the date of the internal disclosure. In this matter, the SEC appears to have waived the 120-day requirement because the whistleblower provided information to the SEC that was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors. According to the SEC’s press release, the “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.” In other words, the compliance officer’s disclosure to the SEC enabled the SEC to take prompt action to protect investors.
SEC Whistleblower Awards to Whistleblowers Who Made Internal Disclosures Prior to Disclosing Information to the SEC
The SEC has approved awards to at least two other whistleblowers that made internal disclosures prior to blowing the whistle to the SEC. On July 31, 2014, the SEC announced an award of $400,000 to a whistleblower who “did everything feasible to correct the issue internally” before disclosing the fraud to the SEC. And on August 29, 2014, the SEC announced an award of approximately $300,000 to a whistleblower who performed audit and compliance functions and disclosed wrongdoing to the SEC only after the company failed to act on the employee’s internal disclosures.
As we approach the five-year anniversary of the Dodd-Frank Act, there is much empirical evidence supporting the wisdom of offering corporate whistleblowers a financial incentive to come forward. The Chamber of Commerce and the business community vigorously opposed Dodd-Frank’s whistleblower provisions and tried to weaken them when the SEC proposed implementing regulations. According to the Chamber, whistleblower reward incentives would weaken internal compliance programs. But recent SEC whistleblower awards suggest that the compliance programs at some companies are mere window-dressing and wholly inadequate to protect investors.
Experienced SEC Whistleblower Lawyers
The experienced whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served in high-level position at a government agency that protects whistleblowers.
Whistleblower law firm Zuckerman Law has substantial experience investigating securities fraud schemes and preparing effective submissions to the SEC concerning a wide range of federal securities violations, including:
- Accounting fraud;
- Investment and securities fraud;
- EB-5 investment fraud;
- Manipulation of a security’s price or volume;
- Fraudulent securities offerings and Ponzi schemes;
- Unregistered securities offerings;
- Investment adviser fraud;
- False or misleading statements about a company or investment;
- Inadequate internal controls; and
- Violations of auditor independence rules.
To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:
To discuss your SEC whistleblower claim, contact the SEC whistleblower lawyers at Zuckerman Law for a free, confidential consultation at 202-262-8959.
See our column in Forbes: One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective.