In the Matter of the Claim for Award
The SEC awarded a whistleblower more than $5.5 million for providing original, critical information that exposed an ongoing fraud targeting vulnerable investors, waiving a procedural violation of Rule 21F-9(d) due to unusual circumstances including pre-Dodd-Frank cooperation and oral reporting at the Enforcement staff’s request.
The SEC granted a whistleblower award exceeding $5.5 million for providing original information that led to a successful enforcement action against a company defrauding a vulnerable investor community. Although the whistleblower failed to submit information in writing as required by Rule 21F-9(d), the Commission waived this requirement due to highly unusual circumstances, including prior ongoing cooperation with SEC staff before the Dodd-Frank Act’s enactment and compliance with Enforcement’s specific request for oral reporting. The whistleblower reported the fraud while still employed by the company, enabling the SEC to halt the scheme, and declined to contest the Preliminary Determination, leading to the final award approval under Section 21F of the Securities Exchange Act.
The SEC awarded a whistleblower more than $5.5 million for providing original, critical information that led to a successful enforcement action against a company engaged in an ongoing fraud that predominantly preyed on a vulnerable investor community. Although the whistleblower did not comply with Rule 21F-9(d), which requires written submission of information to qualify for an award, the Commission exercised its discretionary authority to waive this technical violation due to highly unusual circumstances. These included the fact that the whistleblower had been cooperating with SEC staff before the Dodd-Frank Act’s 2010 enactment, making a written submission impractical, and that the whistleblower provided subsequent information in the exact oral format requested by Enforcement staff. The whistleblower reported the misconduct while still employed by the company, which enabled the SEC to intervene and stop the fraud in real time. The Claims Review Staff recommended the award, citing the reliability of the information, the timing of its provision, and its significant impact on halting the scheme. The whistleblower declined to contest the Preliminary Determination, leading to its formal adoption under Rules 21F-10(f) and (h). The SEC emphasized that granting the award served the public interest and reinforced investor protection, affirming its commitment to incentivizing insiders to come forward even under non-standard conditions.
Extracted insights
- $5.50M $5.5 million $1M–$10M
- person brent j. fields
- person claims review staff
- person covered action
- agency Securities and Exchange Commission
- Claimant provided original information to Securities and Exchange Commission
- Claimant led to successful enforcement of Covered Action
- Claimant reported to Securities and Exchange Commission while employed with subject company
- Claimant provided critical information that helped end on-going fraud preying on vulnerable investor community
- Claims Review Staff recommended award of more than $5.5 million
- Claims Review Staff issued Preliminary Determination on October 28, 2016
- Claimant did not comply with Exchange Act Rule 21F-9(d)
- SEC waived Rule 21F-9(d) non-compliance for Claimant
- Claimant provided written notice on November 1, 2016
- Claimant shall receive award of percentage of monetary sanctions collected in Covered Action
- Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law on July 21, 2010
- Brent J. Fields signed as Secretary
UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 79747 / January 6, 2017 WHISTLEBLOWER AWARD PROCEEDING File No. 2017-5 In the Matter of the Claim for Award in connection with Redacted Notice of Covered Action Redacted ORDER DETERMINING WHISTLEBLOWER AWARD CLAIM On October 28, 2016, the Claims Review Staff (“CRS”) issued a Preliminary Determination related to Notice of Covered Action Preliminary Determination recommended that Redacted Redacted (the “Covered Action”). The (“Claimant”) receive a whistleblower award because 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). 1 Although Claimant did not comply with Exchange Act Rule 21F-9(d)—an omission which might normally require an award denial—the CRS recommended that the Commission waive that rule here given certain highly unusual circumstances. 2 1 Of particular note, Claimant reported to the Commission while still employed with the company that was the subject of the Covered Action, and thereafter provided critical information that helped end an on-going fraud that preyed predominantly on a more vulnerable investor community. 2 Rule 21F-9(d) requires that an individual must have provided original information “in writing” to the Commission in order for that information to be a basis for a whistleblower award if the information was first submitted to the Commission during the interim period between the enactment of the whistleblower program—i.e., July 21, 2010, when the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) was signed into law—and the effective date of the Commission’s whistleblower rules. Further, the CRS recommended that such award be set in the amount of Redacted Redacted percent Redacted of the monetary sanctions collected or to be collected in the Covered Action, which will equal an award of more than $5.5 million. In reaching this recommendation, the CRS considered the factors set forth in Rule 21F-6, 17 C.F.R. § 240.21F-6, in relation to the facts and circumstances of Claimant’s application. On November 1, 2016, Claimant provided written notice to the Commission of Claimant’s decision not to contest the Preliminary Determination. Upon due consideration under Rules 21F-10(f) and (h), 17 C.F.R. § 240.21F-10(f) and (h), the Preliminary Determination of the Claims Review Staff is adopted. 3 Accordingly, for the reasons set forth in the Preliminary Determination, it is hereby ORDERED that Claimant shall receive an award of Redacted percent Redacted 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 3 We concur with the CRS’s recommendation that we exercise our discretionary authority to waive the Claimant’s non-compliance with Rule 21F-9(d). See Section 36(a) of the Exchange Act. We find that it is appropriate in the public interest and consistent with the protection of investors to do so in this matter given a number of highly unusual circumstances, including the following: (1) the Commission’s staff was already actively working with the Claimant before the enactment of the Dodd-Frank Act, and, in such circumstances, we believe that it would have been counter-productive and unreasonable to require that the Claimant revert to providing information to the Commission staff in writing; (2) the Claimant provided the new post Dodd-Frank Act information in the format that the Enforcement staff expressly requested, namely Redacted and (3) the indicia of reliability and the certainty as to the time that the information was provided, which are principle policy rationales underlying the Rule 21F-9(d) writing requirement, are clearly satisfied in the context of this claim because it is undisputed that Redacted . 2
UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 79747 / January 6, 2017 WHISTLEBLOWER AWARD PROCEEDING File No. 2017-5 In the Matter of the Claim for Award in connection with Redacted Notice of Covered Action Redacted ORDER DETERMINING WHISTLEBLOWER AWARD CLAIM On October 28, 2016, the Claims Review Staff (“CRS”) issued a Preliminary Determination related to Notice of Covered Action Preliminary Determination recommended that Redacted Redacted (the “Covered Action”). The (“Claimant”) receive a whistleblower award because 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).1 Although Claimant did not comply with Exchange Act Rule 21F-9(d)—an omission which might normally require an award denial—the CRS recommended that the Commission waive that rule here given certain highly unusual circumstances.2 1 Of particular note, Claimant reported to the Commission while still employed with the company that was the subject of the Covered Action, and thereafter provided critical information that helped end an on-going fraud that preyed predominantly on a more vulnerable investor community. 2 Rule 21F-9(d) requires that an individual must have provided original information “in writing” to the Commission in order for that information to be a basis for a whistleblower award if the information was first submitted to the Commission during the interim period between the enactment of the whistleblower program—i.e., July 21, 2010, when the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) was signed into law—and the effective date of the Commission’s whistleblower rules. Further, the CRS recommended that such award be set in the amount of Redacted Redacted percent Redacted of the monetary sanctions collected or to be collected in the Covered Action, which will equal an award of more than $5.5 million. In reaching this recommendation, the CRS considered the factors set forth in Rule 21F-6, 17 C.F.R. § 240.21F-6, in relation to the facts and circumstances of Claimant’s application. On November 1, 2016, Claimant provided written notice to the Commission of Claimant’s decision not to contest the Preliminary Determination. Upon due consideration under Rules 21F-10(f) and (h), 17 C.F.R. § 240.21F-10(f) and (h), the Preliminary Determination of the Claims Review Staff is adopted.3 Accordingly, for the reasons set forth in the Preliminary Determination, it is hereby ORDERED that Claimant shall receive an award of Redacted percent Redacted 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 3 We concur with the CRS’s recommendation that we exercise our discretionary authority to waive the Claimant’s non-compliance with Rule 21F-9(d). See Section 36(a) of the Exchange Act. We find that it is appropriate in the public interest and consistent with the protection of investors to do so in this matter given a number of highly unusual circumstances, including the following: (1) the Commission’s staff was already actively working with the Claimant before the enactment of the Dodd-Frank Act, and, in such circumstances, we believe that it would have been counter-productive and unreasonable to require that the Claimant revert to providing information to the Commission staff in writing; (2) the Claimant provided the new post Dodd-Frank Act information in the format that the Enforcement staff expressly requested, namely Redacted and (3) the indicia of reliability and the certainty as to the time that the information was provided, which are principle policy rationales underlying the Rule 21F-9(d) writing requirement, are clearly satisfied in the context of this claim because it is undisputed that Redacted . 2