In the Matter of the Claim for Award
A former insider and foreign national whistleblower received over $4.1 million from the SEC for providing original information that exposed a multi-year securities law violation, with the award reduced slightly due to delayed reporting but mitigated by the delay occurring before the whistleblower program’s 2010 launch and uncertain extraterritorial protections.
The SEC awarded a former company insider and foreign national more than $4.1 million for providing original information that led to a successful enforcement action involving a widespread, multi-year securities law violation. The award, set as a percentage of monetary sanctions collected, was reduced due to the whistleblower’s unreasonable delay in reporting, but mitigated by the fact that much of the delay occurred before the SEC’s whistleblower program began in 2010 and because U.S. anti-retaliation protections likely did not apply abroad. The SEC adopted the Claims Review Staff’s recommendation without contest, affirming the award as appropriate based on the significance of the information, the whistleblower’s ongoing cooperation, and the public interest in deterring fraud.
The SEC awarded a former company insider and foreign national more than $4.1 million for providing original, critical information that led to a successful enforcement action against an unnamed entity for a widespread, multi-year securities law violation. The whistleblower voluntarily disclosed the misconduct and provided substantial ongoing assistance throughout the investigation, satisfying key criteria under Section 21F of the Securities Exchange Act. Although the award was reduced due to an unreasonable delay in reporting, the SEC mitigated this penalty because much of the delay occurred prior to the establishment of the whistleblower program in July 2010, when financial incentives and protections were absent. Additionally, the SEC acknowledged that the whistleblower’s foreign status raised uncertainty about the applicability of U.S. anti-retaliation protections under Section 21F(h)(1), further justifying a lenient assessment of the delay. The Claims Review Staff’s preliminary recommendation of a percentage-based award was accepted without contest, and the final award is tied to monetary sanctions collected in the covered action, including any future collections. The SEC emphasized the importance of rewarding insiders who expose serious fraud, even when reporting is delayed, particularly when mitigating factors like extraterritoriality and program timing are present. This case underscores the SEC’s commitment to incentivizing whistleblowers globally, while balancing fairness and deterrence in its award determinations.
Extracted insights
- $4.10M $4.1 million $1M–$10M
- agency important information and assistance throughout sec investigation
- agency sec to widespread, multi-year securities-law violation
- agency Securities and Exchange Commission
- agency unreasonable delay in reporting misconduct to sec
- person whistleblower award program
- Claimant receive whistleblower award of more than $4.1 million
- Claimant provided original information to the SEC that led to successful enforcement of the Covered Action
- Claimant was former company insider
- Claimant alerted SEC to widespread, multi-year securities-law violation
- Claimant provided important information and assistance throughout SEC investigation
- SEC issued Preliminary Determination recommending whistleblower award
- SEC adopted recommendation of the Claims Review Staff
- Claimant had unreasonable delay in reporting misconduct to SEC
- Whistleblower Award Program established July 2010
- Claimant was foreign national working outside the United States
UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 82214 / December 5, 2017 WHISTLEBLOWER AWARD PROCEEDING File No. 2018-3 In the Matter of the Claim for Award in connection with Redacted Notice of Covered Action Redacted ORDER DETERMINING WHISTLEBLOWER AWARD CLAIM The Claims Review Staff (“CRS”) issued a Preliminary Determination recommending that Claimant Redacted receive a whistleblower award in the amount of Redacted percent ( *** %) of the monetary sanctions collected, or to be collected, in the Covered Action. This proposed award would yield a likely payout to the Claimant of more than $4.1 million. Claimant subsequently provided written notice of Claimant’s decision not to contest the Preliminary Determination. The recommendation of the CRS is adopted. The record demonstrates that the Claimant voluntarily provided original information to the Commission that led to the successful enforcement of the Covered Action pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78u-6(b)(1), and Rule 21F-3(a) thereunder, 17 C.F.R. § 240.21F-3(a). Moreover, applying the award criteria specified in Rule 21F-6 of the Exchange Act to the specific facts and circumstances here, we find that the proposed award amount is appropriate. 1 In reaching that determination, we positively assessed the facts that the 1 In assessing the appropriate award amount, Rule 21F-6 provides that the Commission consider: (1) the significance of information provided to the Commission; (2) the assistance provided in the Commission action; (3) law enforcement interest in deterring violations by granting awards; (4) participation in internal compliance systems; (5) culpability; (6) Claimant was a former company insider who both alerted the Commission to a widespread, multi-year securities-law violation, and continued to provide important information and assistance throughout the Commission’s investigation. Nonetheless, we have determined that these positive award considerations are somewhat offset by the Claimant’s unreasonable delay in reporting the misconduct to the Commission. On balance, we believe that these competing considerations support the CRS’s award determination. 2 Accordingly, it is hereby ORDERED that Claimant shall receive an award of Redacted percent ( *** %) of the monetary sanctions collected in this Covered Action, including any monetary sanctions collected after the date of this Order. By the Commission. Brent J. Fields Secretary unreasonable reporting delay; and (7) interference with internal compliance and reporting systems. 2 We have not weighed the Claimant’s delay as severely as we might otherwise have done due to the existence of several mitigating factors that we find relevant given the particular facts and circumstances of this matter. We set forth two of those mitigating factors herein. First, much of the Claimant’s reporting delay occurred prior to the establishment of the whistleblower award program in July 2010, and we have generally not penalized whistleblowers as severely for such delays due to the absence of the substantial inducements that Section 21F of the Exchange Act provides. See, e.g., Exchange Act §§ 21F(a)-(c) (award program); id. § 21F(d) (anonymity); id. § 21F(heightened confidentiality protections). Second, the Claimant was a foreign national working outside the United States, and as such, it is unclear whether the employment anti- retaliation protections afforded by Section 21F(h)(1) of the Exchange Act would apply to the Claimant. See Liu v. Siemens AG, 763 F.3d 175 (2d Cir. 2014) (holding that “the whistleblower antiretaliation provision of the [Exchange] Act, 15 U.S.C. § 78u-6(h), does not apply extraterritorially”). 2
UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 82214 / December 5, 2017 WHISTLEBLOWER AWARD PROCEEDING File No. 2018-3 In the Matter of the Claim for Award in connection with Redacted Notice of Covered Action Redacted ORDER DETERMINING WHISTLEBLOWER AWARD CLAIM The Claims Review Staff (“CRS”) issued a Preliminary Determination recommending that Claimant Redacted receive a whistleblower award in the amount of Redacted percent ( ***%) of the monetary sanctions collected, or to be collected, in the Covered Action. This proposed award would yield a likely payout to the Claimant of more than $4.1 million. Claimant subsequently provided written notice of Claimant’s decision not to contest the Preliminary Determination. The recommendation of the CRS is adopted. The record demonstrates that the Claimant voluntarily provided original information to the Commission that led to the successful enforcement of the Covered Action pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78u-6(b)(1), and Rule 21F-3(a) thereunder, 17 C.F.R. § 240.21F-3(a). Moreover, applying the award criteria specified in Rule 21F-6 of the Exchange Act to the specific facts and circumstances here, we find that the proposed award amount is appropriate.1 In reaching that determination, we positively assessed the facts that the 1 In assessing the appropriate award amount, Rule 21F-6 provides that the Commission consider: (1) the significance of information provided to the Commission; (2) the assistance provided in the Commission action; (3) law enforcement interest in deterring violations by granting awards; (4) participation in internal compliance systems; (5) culpability; (6) Claimant was a former company insider who both alerted the Commission to a widespread, multi-year securities-law violation, and continued to provide important information and assistance throughout the Commission’s investigation. Nonetheless, we have determined that these positive award considerations are somewhat offset by the Claimant’s unreasonable delay in reporting the misconduct to the Commission. On balance, we believe that these competing considerations support the CRS’s award determination.2 Accordingly, it is hereby ORDERED that Claimant shall receive an award of Redacted percent ( ***%) of the monetary sanctions collected in this Covered Action, including any monetary sanctions collected after the date of this Order. By the Commission. Brent J. Fields Secretary unreasonable reporting delay; and (7) interference with internal compliance and reporting systems. 2 We have not weighed the Claimant’s delay as severely as we might otherwise have done due to the existence of several mitigating factors that we find relevant given the particular facts and circumstances of this matter. We set forth two of those mitigating factors herein. First, much of the Claimant’s reporting delay occurred prior to the establishment of the whistleblower award program in July 2010, and we have generally not penalized whistleblowers as severely for such delays due to the absence of the substantial inducements that Section 21F of the Exchange Act provides. See, e.g., Exchange Act §§ 21F(a)-(c) (award program); id. § 21F(d) (anonymity); id. § 21F(heightened confidentiality protections). Second, the Claimant was a foreign national working outside the United States, and as such, it is unclear whether the employment anti- retaliation protections afforded by Section 21F(h)(1) of the Exchange Act would apply to the Claimant. See Liu v. Siemens AG, 763 F.3d 175 (2d Cir. 2014) (holding that “the whistleblower antiretaliation provision of the [Exchange] Act, 15 U.S.C. § 78u-6(h), does not apply extraterritorially”). 2