SEC Whistleblower Award Reduced To 20% Due To Whistleblower’s Own Culpability & Unreasonable Delay

A whistleblower voluntarily provided original information to the United States Securities and Exchange Commission (“SEC”) that led to a successful SEC enforcement action.  The SEC’s Claims Review Staff issued a Preliminary Determination recommending that the individual receive an award.  However, the Commission ordered the SEC whistleblower award reduced to less than it could have been had the whistleblower not been partially responsible for the fraud that he or she reported, and had he or she reported it to the SEC in a timely manner.

The Claims Review Staff determined that “in relation to the facts and circumstances” of the whistleblower’s award application, the amount of the award should “be set at twenty percent (20%) of the monetary sanctions collected or to be collected in the Covered Action”.

The whistleblower did not challenge the Claims Review Staff’s Preliminary Determination.

In its Order Determining Whistleblower Award Claim, the Commission adopted the Preliminary Determination of the Claims Review Staff and granted the individual an SEC whistleblower reward.

SEC whistleblower award reduced

The SEC Order

The Whistleblower’s Percentage Award Could Have Been Higher

According to the Commission’s Order, the whistleblower could have received an even greater award than 20%.

As stated in the Order, in making its preliminary award assessment, “the Claims Review staff reduced the award below what it might otherwise have been”.  (Italics added.)

The Commission’s Order provided two general explanations for the Claims Review Staff’s recommendation to have the SEC whistleblower award reduced.

First, the Commission cited the whistleblower’s own “culpability in connection with the securities law violations at issue in the Covered Action”.  According to the SEC whistleblower rules, the Commission can order an SEC whistleblower award reduced as a result of a whistleblower’s own culpability (liability or responsibility) for the fraud or violation that he or she reported.

Second, the Commission referred to the whistleblower’s “unreasonable delay in reporting the wrongdoing to the Commission”.  Unreasonable delay is another factor that can lead to reductions in SEC whistleblower rewards.

Accordingly, the Commission granted the whistleblower a 20% SEC whistleblower award reduced from the 21% – 30% award that he or she might otherwise have received.

Additional Information

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