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SEC hands out $14 million whistle-blower award


The U.S. Securities and Exchange Commission said Tuesday it has awarded more than $14 million to a whistle-blower whose information led to an enforcement action that recovered “substantial” investor funds.

An SEC spokeswoman said the agency would not reveal the name of the company involved nor any further details beyond its statement.

According to the agency's statement, the award is the largest made by the SEC's whistle-blower program to date.

The SEC's Office of the Whistleblower, which was established in 2011 under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, rewards information that results in an SEC enforcement action with sanctions exceeding $1 million. Awards can range from 10% to 30% of the money collected in a case.

The SEC said the whistle-blower, who does not wish to be identified, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible.

It said the SEC was able to bring an enforcement action against the perpetrators and secure investor funds less than six months after receiving the whistle-blower's tip.

“Our whistle-blower program already has had a big impact on our investigations by providing us with high-quality, meaningful tips,” said SEC Chair Mary Jo White. “We hope an award like this encourages more individuals with information to come forward.”

Observers have said Dodd-Frank's whistle-blower provisions are particularly problematic for firms.

Gregory Keating, a shareholder with law firm Littler Mendelson P.C. in Boston, who is co-chair of its Whistleblowing & Retaliation Practice, said many are “scratching their heads” over the identity of the firm involved, and that it was surprising the SEC did not identify it.

Mr. Keating said the $14 million award “is a harbinger of things to come.” The SEC has a “pretty deep well” of cases in which it has achieved a settlement of more than $1 million, where technically a bounty is available. Mr. Keating said by his count, there are more than 200 such cases “that were at least technically eligible for potential bounty awards.”

Mr. Keating said the SEC has a fund of more than $450 million to draw upon in making whistle-blower awards, “and this obviously is going to generate a lot of public attention and only increase the firestorm of complaints and litigation that we're seeing” in this space.