Securities Cases

Implemented in 2011, the SEC's whistleblower program has received more than 22,000 tips, secured over $2.5 billion in penalties and restitution, and awarded over $523 million to successful tipsters.

The Commission has just approved a set of amendments to the whistleblower program. Commissioners voted on a collection of proposals dating back to 2018. One of the proposed rules would give the agency the discretion to award the statutory maximum of 30% whenever the final amount would not surpass $2 million. This concept garnered support from the Commission, but the threshold has been adjusted to $5 million.

Another proposed rule would have granted the SEC discretion to reduce awards whenever monetary sanctions surpassed $100 million, but the commissioners voted against it.

After the SEC opened up the proposals for public comments, it received about 150 letters. Many respondents viewed the award reduction rule as a move to impose a cap on whistleblower bounties. A letter by Senators Sherrod Brown, Jack Reed, Elisabeth Warren, Patrick Leahy, Chris Van Hollen, and Cristopher Coons warned that "Regrettably, the Proposal could deter whistleblowers."...

Following the announcement of an $83 million whistleblower award, the SEC is looking to put a cap on tipster payouts. A recent 3-2 vote by the Commission said yes to capping awards at $30 million.

The $83 awarded to three whistleblowers last March ignited the flame of the “awards are getting too large” sentiment that guides tort reform advocates across the nation. When it comes to SEC whistleblowers, they may finally be getting their big day.

The cap is, of course, bad news for the public and good news for dishonest corporations that make billions of dollars a year, for whom having to shell out one or two hundred million is merely a tickle.

Awards are an incentive to whistleblowers, who often lose their jobs and their livelihood in their attempt to expose fraudsters. If putting caps on rewards becomes a habit, it will be bonanza time for fraudsters, but the SEC does not appear to see it that way....

The SEC does the best job of any government agency when it comes to ensuring whistleblower identities remain confidential. The recent awards are not the exception. All we know is that five different individuals submitted information to the SEC exposing misconduct by a company in the securities industry.

After careful consideration, the SEC established that only two of the whistleblowers had provided original information, which made them eligible for an award.

The two anonymous whistleblowers offered critical evidence that enabled the SEC to bring an enforcement action, including substantial monetary sanctions, against the unidentified wrongdoer. Enforcement actions of this type have now surpassed the $1 billion threshold in terms of financial remedies collected from fraudsters.

According to the SEC order that concluded the recent case, the first whistleblower alerted the agency about the misconduct, while whistleblower No 2 provided additional information that helped SEC staff bring the relevant enforcement action.

Both whistleblowers collaborated closely with the SEC to ensure the wrongdoers could be held accountable....

The SEC recently announced it has awarded $2.5 million to a whistleblower who is also a government employee. This is the first time the SEC has publicized giving an award to an employee of a government agency.

As it is customary with the SEC, the identity of the whistleblower remains anonymous, and specific details about the wrongdoing have not been revealed. The novelty here is the fact that a government employee has been considered eligible for an award.

On paper, government agency employees can receive whistleblower awards as long as they are not employees of a law enforcement organization, the SEC itself, or a number of regulatory agencies, which include the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation.

Although we have very little information about who the whistleblower is, the SEC revealed that he or she worked for a government agency that has a law enforcement component, but not in that specific section....

Last year set new records for Foreign Corrupt Practices Act (FCPA) enforcement, with 27 companies paying over $2.48 billion in FCPA settlements. In 2016, the Department of Justice (DOJ) reached four of the largest FCPA settlements in history: Teva Pharmaceuticals Industries ($519 million), Odebrecht and Braskem ($419.8 million), Och-Ziff Capital Management Group ($412 million) and VimpelCom Limited ($397.6 million).
These precedent-setting resolutions speak volumes regarding the...

Lincoln Financial Group subsidiary, Indiana-based Lincoln Financial Securities Corp., has agreed to pay a $650,000 Financial Industry Regulatory Authority (FINRA) fine and tighten up its cybersecurity practices after hackers obtained sensitive information on 5,400 customers, FINRA reported Monday.

Breach Follows Recent FINRA Reprimand

This isn’t the first time Lincoln Financial Securities has been in trouble for less-than-adequate cybersecurity. In February 2011, FINRA fined the company $450,000 for insufficient cybersecurity on its electronic portfolio management system, according to the Law360 report. After the company’s 2011 penalty, it amended cybersecurity policies to offer guidance for representatives of cloud-based data storage. Unfortunately, this was insufficient to prevent another breach....

The Securities and Exchange Commission’s (SEC) record-breaking enforcement numbers reported for fiscal year 2016 highlight the importance of securities fraud whistleblowers in combatting misconduct and illegal activity.

The agency played hardball against securities fraud this year, implementing innovative data and analytics techniques to detect suspicious activity and investigate investment advisors, accountants, companies and their C-Suite leaders.

Whistleblowers across the globe aided in uncovering misconduct and contributed heavily to the overall success of the SEC’s fight against fraud....

You don't have to be a U.S. citizen to get a whistleblower award. The U.S. Securities and Exchange Commission (SEC) has paid an Australian and former BHP Billiton employee a $3.75 million whistleblower award for reporting the company’s violations of the Foreign Corrupt Practices Act at the Beijing Olympics, the Sydney Morning Herald announced Monday.

First Time SEC Pays Whistleblower Award to Australian Employee

The BHP Billiton case marks the first time the SEC has paid a whistleblower award to an employee of an Australian company. Under the Sarbanes-Oxley Act, the SEC offers whistleblowers cash awards for tips leading to successful government recovery. The Australian government does not offer whistleblower rewards or protections to its citizens, and the case is causing regions of Australia to evaluate the possibility of implementing its own whistleblower laws....

The website of the Securities and Exchange Commission's whistleblower program is rather welcoming. Its introductory text explains that, “whistleblowers can help the Commission identify possible fraud and other violations” allowing it to “minimize the harm to investors, better preserve the integrity of the United States' capital markets, and more swiftly hold accountable those responsible for unlawful conduct.”

The SEC has been faithful to its practice of keeping cases and whistleblower identities private ever since the Office of the Whistleblower was first established. Partly because of this, SEC whistleblower awards have always been extremely newsworthy, especially when the whistleblower's name somehow made its way into a journalist's desktop.

But if the SEC’s whistleblower awards have appeared to be a rarity so far, that seems to be about to change.

Securities Exchange Commission Whistleblower Program Gaining Momentum

In terms of scope, rewards, and recoveries, the program has been gaining momentum, and it has just hit an important benchmark. SEC has just awarded over $5 million to one whistleblower and $3.5 million to another, all in the span of one week. The $5 million award is the third largest amount the SEC has ever paid a whistleblower....