Compliance Officer Awarded $1 Million Whistleblower Award

Compliance Officer Awarded $1 Million Whistleblower Award

The Securities and Exchange Commission (SEC) recently announced the whistleblower award. An award that will give more than $1 million dollars to a compliance officer who provided information resulted in an enforcement action against the whistleblower’s employer.

The whistleblower award reinforces that the SEC’s program continues to play a vital role in the agency’s ability to prosecute securities fraud. Since its inception more than four years ago, the SEC’s whistleblower program has paid more than $50 million to 16 whistleblowers who provided the SEC with unique and useful information that contributed to a successful enforcement action. 

In most cases, whistleblowers can only provide tips regarding information that they learn about firsthand. Accordingly, officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally are not eligible for an award. However, there are several notable exceptions. In this case, the whistleblower relied on an exemption under which corporate officers can qualify as whistleblowers in cases where investors will be substantially harmed if a potential securities violation is not reported.

“When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement, in an SEC press statement.  “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”

This is the second whistleblower award given to compliance professional. As previously discussed on the Scarinci Hollenbeck Business Law News Blog, the SEC previously awarded between $475,000 and $575,000 to a former company officer who blew the whistle on securities fraud after her employers declined to take action. That case was the first to rely on an exemption under which compliance professionals can be compensated for providing the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue.

Together, the SEC’s recent whistleblower awards to corporate compliance officers highlight that companies must have robust internal reporting systems in place to address complaints of misconduct. If not, corporate officers may be compelled to take their information directly to the SEC.

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AboutKenneth C. Oh

Kenneth C. Oh practices in the Business Law Group, with an emphasis in areas of corporate finance and securities law, mergers & acquisitions, investment banking, and broker-dealer regulation.Full Biography

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