In the past few days, it has been reported that a whistleblower was awarded $279 million under the “cash-for-tips” scheme implemented by the US Securities and Exchange Commission (“SEC”). Under this scheme, the SEC’s Office of the Whistleblower (OWB) may award whistleblowers between 10% to 30% of the money collected when the SEC and other agencies impose sanctions on companies of more than $1 million.[1]
As reported by the WSJ, the whistleblower award related to information provided in connection to the Ericsson investigation, which assisted the DOJ and SEC in achieving the 2019 FCPA settlement.[2]
Despite denying the claims of Claimant’s 2 and 3, the redacted court order provides some insight into the award process and how the SEC decides who qualifies for an award under the “cash-for-tips” scheme. Some relevant factors considered in this case included:[3]
- Information was voluntarily provided;
- Information led to successful enforcement action;
- It’s not a bar to an award if the agency was already aware of the miscount and had already started an investigation;
- The information was labelled as “significant” as it triggered an expansion in the regulatory investigation;[4]
- The whistleblower provided substantial and ongoing assistance to the SEC (via written submissions, communications and interviews);[5]
- Claimant 2 did not report the information through the Company’s internal whistleblower, legal or compliance procedures “before or at the same time” of reporting them to the SEC. Furthermore, the Company already “began internal investigative work not in response to any tip or other information provided by Claimant 2” but for separate complaints.[6]
- Claimant 3 provided information regarding a Subsidiary but the SEC deemed that “none of the information provided by Claimant 3 at any point in time advance or impacted the Investigation or Covered Action”.[7]
Since this scheme was introduced by the SEC 10 years ago, European practitioners have observed from a distance, to see how things would pan out. However, it appears that things are changing on this side of the pond, as section 3 the Office of the Whistleblower Bill (which is currently going through the 2nd reading) gives the OWB the power to “provide financial redress to individuals whose disclosure is deemed by the Office to have harmed their employment, reputation or career”.[8]
We look forward to seeing how the bill progresses and what steps (if any) the English OWB will take to incentivise, remunerate and redress whistleblowers in the future.
[1] https://www.sec.gov/whistleblower
[2] https://www.wsj.com/articles/record-279-million-whistleblower-award-went-to-a-tipster-on-ericsson-5af40b98
[3] https://www.sec.gov/rules/other/2023/34-97438.pdf
[4] Page 5, UNITED STATES OF AMERICA before SECURITIES AND EXCHNAGE COMISSION, WHISTLEBLOWER AWARD PROCEEDINGS File No. 2023-55.
[5] ibid
[6] Page 8, UNITED STATES OF AMERICA before SECURITIES AND EXCHNAGE COMISSION, WHISTLEBLOWER AWARD PROCEEDINGS File No. 2023-55.
[7] Page 11, UNITED STATES OF AMERICA before SECURITIES AND EXCHNAGE COMISSION, WHISTLEBLOWER AWARD PROCEEDINGS File No. 2023-55.
