US Economy
US Securities and Exchange Commission to pay $30m award to foreign whistleblower
By Michael Hennigan, Finfacts founder and editor
Sep 23, 2014 - 5:30 AM

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The US Securities and Exchange Commission (SEC) on Monday announced an expected award of more than $30m to a foreign whistleblower who provided key original information that led to a successful SEC enforcement action. The award will be the largest made by the SEC’s whistleblower program to date and the fourth award to a whistleblower living in a foreign country, demonstrating the program’s international reach.

The agency reduced the award because the tipster delayed reporting the misconduct after first becoming aware of it.

“This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect,” said Andrew Ceresney, director of the SEC’s Division of Enforcement. “This record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement.”

Sean McKessy, chief of the SEC’s Office of the Whistleblower, added, “This award of more than $30m shows the international breadth of our whistleblower program as we effectively utilize valuable tips from anyone, anywhere to bring wrongdoers to justice. Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the US securities laws.”

The SEC’s whistleblower program rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1m. Whistleblower awards can range from 10% to 30% of the money collected in a case. The money paid to whistleblowers comes from an investor protection fund established by Congress at no cost to taxpayers or harmed investors. The fund is financed through monetary sanctions paid by securities law violators to the SEC. Money is not taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. The previous high for an SEC award to a whistleblower was $14m, which was announced in October 2013.

The SEC awarded its first whistleblower under the program following its inception in fiscal year 2012. The program awarded four more whistleblowers in FY 2013 (fiscal year), and has awarded nine whistleblowers in FY 2014.

“We’re pleased with the consistent yearly growth in the number of award recipients since the program’s inception,” McKessy said.

The Wall Street Journal said the award to the foreign tipster shows that non-US residents stand to gain big from the agency's bounty program. But an appeals-court ruling last month shows they also may have more to lose than their US counterparts.

"In August, the Second Circuit Court of Appeals upheld a lower-court ruling that Dodd-Frank's anti-retaliation protections don't cover a former Siemens China staffer. The appeals-court ruling cited a 2010 US Supreme Court decision that says legislation doesn't apply outside the US unless there is evidence Congress indicated otherwise, and pointed out that the former staffer's case had little connection with the US. The SEC said in the fine print of Monday's record whistleblower award that it didn't think that ruling applied to this award.

Siemens AG said an internal investigation showed the former staffer's accusations were meritless and that his departure from the company resulted from legitimate performance reasons."

That ruling raises questions about whether foreign tipsters like the recipient of this record award have the same protections as U.S.-based whistleblowers in the event that they are retaliated against for reporting suspected wrongdoing."


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