SEC Announces Third Whistleblower Award to Individual in Compliance-Related Role

On March 30, 2020, the SEC announced a rare award in the amount of $450,000 to a whistleblower having compliance-related functions.  The SEC whistleblower program, which was established in 2011, allows the SEC to provide monetary awards to individuals who voluntarily report high-quality, original information to the SEC that leads to an enforcement action where over $1,000,000 in sanctions is ordered.  The awards can range between 10% and 30% of the money collected.  

According to SEC Rules and the Order, “original information” typically excludes information that the whistleblower obtained by being “[a]n employee whose principal duties involve compliance or internal audit responsibilities…” (the “Compliance Officer Exclusion Rule”).  However, an exception applies if the whistleblower waits at least 120 days after providing the information to the company’s audit committee, chief legal officer, chief compliance officer or a supervisor, or if the whistleblower received the information under circumstances indicating that any of the foregoing parties was already aware of the information.  In this instance, the whistleblower first reported certain information to the whistleblower’s supervisor and then waited more than 120 days to report the same information to the SEC.  The rest of the information that led to the successful enforcement action would have been known to the whistleblower’s supervisor at the time.  Accordingly, the SEC concluded that the whistleblower had satisfied the 120-day exception to the Compliance Officer Exclusion Rule.  

In announcing the award, Jane Norberg, Chief of the SEC’s Office of the Whistleblower, stated “[t]o ensure that important information about securities law violations is reported to the SEC when appropriate corrective action is not taken by the company, the rules permit awards to compliance professionals in limited circumstances.”  This is the SEC’s third ever whistleblower award to an individual who had compliance or internal audit responsibilities.