On August 29, 2014, the SEC announced a whistleblower award of more than $300,000 to a company employee who performed audit and compliance functions and reported wrongdoing to the SEC after the individual’s employer failed to take action after the misconduct was reported internally by the employee. The employee disclosed the information to the SEC after the company failed to take any action within 120 days.
The order, which in order to protect the confidentiality of the whistleblower is heavily redacted, is available on the SEC website.
The information provided by the employee led to a successful SEC enforcement action. The award was calculated based upon 20% of the monetary sanctions realized in the proceeding. Under the Whistleblower program, awards are available when the information results in SEC sanctions exceeding $1 million and can range from 10 to 30% of the money collected.
This award is significant since it is the first award for a whistleblower who performed an audit or compliance function at a company, and since the accompanying press release mentions legal staff as potential award recipients in appropriate cases.
In the press release announcing the award, Sean McKessy, the Chief of the SEC’s Office of the Whistleblower, is quoted as saying:
“Individuals who perform internal audit, compliance, and legal functions for companies are on the front lines in the battle against fraud and corruption. They often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one…These individuals may be eligible for an SEC whistleblower award if their companies fail to take appropriate, timely action on information they first reported internally.”