A whistleblower has received a $400,000 award from the U.S. Securities and Exchange Commission (SEC) for reporting a fraud to regulators after efforts to address the issue internally proved fruitless.
The U.S. whistleblower law doesn’t allow specific disclosure about the cases that result in awards. However, the SEC does say that, in this case, the whistleblower provided it with “specific, timely, and credible information that allowed for a more rapid investigation than otherwise would have been possible”.
It also reports that the unnamed whistleblower “tried on several occasions and through several mechanisms to have the matter addressed internally at the company”, before they turned to the SEC.
“The whistleblower did everything feasible to correct the issue internally. When it became apparent that the company would not address the issue, the whistleblower came to the SEC in a final effort to correct the fraud and prevent investors from being harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower.
The SEC’s whistleblower program rewards individuals that provide high-quality, original information that results in an SEC enforcement action with sanctions of at least $1 million. Awards represent between 10% and 30% of the money collected in a case.
“This award recognizes the significance of the information that the whistleblower provided us and the balanced efforts made by the whistleblower to protect investors and report the violation internally,” said McKessy.
Earlier this week, British regulators said that, after studying the issue, and particularly the U.S. model, they will not be introducing a similar system of rewarding tipsters. They concluded that paying whistleblowers does not improve the quality of tips that regulators receive, or enhance market integrity. In Canada, the Ontario Securities Commission (OSC) has said that it is considering a whistleblower award program, but it has yet to decide whether to introduce one.