Two years after issuing its first payout under the whistleblower provisions of the Dodd-Frank Act of 2010, aggressive collection efforts by the Securities and Exchange Commission (SEC) have recovered an additional $500,000 penalty in the case. Accordingly, the whistleblower who helped the SEC successfully prosecute the multi-million dollar fraud case will receive an additional $150,000.
The whistleblower — who has not been identified to protect confidentiality — was awarded the maximum percentage (30%) allowed under Dodd-Frank in August 2012. This recent payment will increase the whistleblower’s payout to approximately $200,000, with more expected as the SEC collects from other defendants in the case.
The SEC's whistleblower program rewards individuals who offer high-quality original information that leads to an SEC enforcement action awarding more than $1 million in sanctions. Awards can range from 10 to 30% of the money collected by the SEC, but can only be issued as the SEC actually collects from violators of securities laws.
Dodd-Frank also provides for enhanced anti-retaliation employment protections for whistleblowers and includes provisions to protect their identity.
Companies should note that employees often only report violations to the SEC after exhausting internal options. Consequently, it is important to have whistleblowing policies and procedures in place, as well as a system for investigating the merit of such tips objectively. Furthermore, employers who retaliate against employees who report such information can face private lawsuits by the employee, as well as legal action by the SEC or the U.S. Department of Labor under the Sarbanes-Oxley Act.