The Securities and Exchange Commission has announced its first whistleblower award under provisions established by the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010.
An unidentified whistleblower will receive $50,000, representing 30 percent of the approximately $150,000 collected so far in the SEC’s enforcement action against a defendant in a fraud case, the agency said in a news release. The defendant’s identity was not disclosed.
The whistleblower stands to receive more money, if the defendant continues to pay. Under Dodd-Frank, the reward kicks in only if a whistleblower’s information resulted in a case in which $1 million or more in sanctions were ordered. An order approving the claim is dated May 18.
A second whistleblower in the same matter will receive no award because the person’s information did not significantly contribute to the fraud investigation, the SEC said.
The SEC pays whistleblowers between 10 and 30 percent of the money collected in cases that result in $1 million or more in sanctions.
“This whistleblower provided the exact kind of information and cooperation we were hoping the whistleblower program would attract,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement. “Had this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”
The office was established in August 2011 following the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010.
The SEC said that the whistleblower tip led to $1 million in court-ordered sanctions against the defendant, though only $150,000 has so far been collected. If more money is collected from the defendant, the whistleblower award will increase, the SEC said.
The tip was received online through the SEC’s Tip, Complaint or Referral Portal.
The court is considering whether to issue final judgment other defendants in this matter.
The Whistleblower Office has previously said that the vast majority of tips are first reported internally to a company.
In June, Whistleblower Office Deputy Chief Jane Norberg said the office is expanding its ranks to include five additional attorneys, a paralegal and a program specialist, and Sean McKessy, the office’s chief, said the program receives about eight tips each day.
“The fact that we made the first payment after just one year of operation shows that we are open for business and ready to pay people who bring us good, timely information,” McKessy said in a statement.
Under the Dodd-Frank Act, the SEC said it cannot disclose a whistleblower’s identity or information that could be expected to reasonably identify the individual. The law contains enhanced protection of whistleblowers from employer retaliation.
The SEC has not disclosed further information on the defendant in the fraud case.
UPDATE: This story was updated to include additional information from the SEC.
