Information “leads to” a successful SEC action if it causes the SEC to:
- Open an investigation (even if the information ultimately does not have a strong nexus to the SEC’s charges in the action);
- Re-open a previously closed investigation;
- Pursue a new line of inquiry; or
- If the information significantly contributes to an open investigation.
Whistleblowers have enabled the SEC to protect investors and halt ongoing fraud. The largest SEC whistleblower awards to date are $114 million and $50 million.
An individual may be eligible to receive an award where their information leads to a successful enforcement action—meaning generally that the original information either caused the staff to open an examination or investigation, or the original information significantly contributed to a successful enforcement action where the matter was already under examination or investigation.
Of the whistleblowers who received awards in FY 2021, approximately 56% provided original information that caused staff to open an investigation or examination, and approximately 44% received awards because their original information significantly contributed to an already existing investigation or examination. In assessing whether information assisted with an ongoing matter, the SEC considers factors such as whether the information allowed the SEC to bring an action in significantly less time or with significantly fewer resources, and whether it supported additional successful charges, or successful claims against additional individuals or entities.
A whistleblower whose only source of original information is an existing investigation or proceeding is unlikely to qualify for an award. Information that is exclusively derived from a governmental investigation is expressly excluded from the definition of “original information” under Section 21F(a)(3) of the Exchange Act.
For more information about whistleblower rewards and bounties, contact the SEC whistleblower lawyers at Zuckerman Law at 202-262-8959. And click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:
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:
How the SEC Assesses Whether an SEC Whistleblower Tip Led to a Successful Enforcement Action
The May 2011 SEC release (Release No. 34-64545) adopting the rules governing the SEC Whistleblower Program states:
“As a general matter, in assessing whether information ‘led to’ a successful enforcement action, we will examine the relationship between the information in a submission and the allegations in the Commission’s complaint filed in the civil action or order filed in the administrative proceeding. Our inquiry will focus on whether the submission identifies persons, entities, places, times and/or conduct that correspond to those alleged by the Commission in the judicial or administrative action. As part of this analysis, we may consider whether, and the extent to which, the information included: (1) Allegations that formed the basis for any of the Commission’s claims in the judicial or administrative action; (2) provisions of the securities laws that the Commission alleged as having been violated in the judicial or administrative action; (3) culpable persons or entities (as well as offices, divisions, subsidiaries or other subparts of entities) that the Commission named as defendants, respondents or uncharged wrongdoers in the judicial or administrative action; or (4) investors or a defined group of investors that the Commission named as victims or injured parties in the judicial or administrative action.”
Tips for Qualifying for an SEC Whistleblower Award
SEC Whistleblower Bounties
Information leads to a successful SEC action if it causes the SEC to open an investigation, or if it causes the SEC to reopen a previously closed investigation. It can also lead to a successful enforcement action if it causes the SEC to pursue a new line of inquiry, or if it significantly contributes to an already open investigation.