$1M Whistleblower Award to 3 Compliance Officers

Three gutsy and persistent compliance professionals are all a bit richer today, after the Securities and Exchange Commission gave them a joint whistleblower award of more than $1 million for helping the agency to prosecute misconduct at their firm.

As usual with SEC whistleblower awards, we don’t know much about the particulars — including who the whistleblowers were, the business that employed them, or what misconduct triggered the SEC enforcement action. All such details are routinely kept confidential in SEC whistleblower award announcements. 

The SEC award order, issued on Aug. 27, does, however, say the three recipients “held compliance roles” at their firm when they reported their concerns to the SEC. (Since the SEC routinely takes several years to enforce a case and then evaluate whistleblower award claims, we don’t even know whether these individuals remain at their firm.)

Compliance officers and internal auditors are only eligible to win SEC whistleblower awards if they first try to report the matter internally to senior management. If management takes no action for 120 days, then the compliance officer can bring concerns to the SEC and submit a whistleblower award claim under the Dodd-Frank Act. 

We don’t see too many awards going to compliance officers, but it does happen. One compliance officer received a $450,000 award in early 2020, for example. 

For our three recipients today, the SEC only had this to say:

  • Claimant 1 received the largest share of that $1 million (How large a share? The SEC doesn’t say) because he or she “provided the most significant and comprehensive information about the conduct to staff that proved vital to the success” of the enforcement action. He or she also provided “extraordinary assistance” throughout the investigation.
  • Claimant 2 received a smaller but apparently still substantial share, because this person was the first to report the matter to the SEC and “Claimant 2’s information provided a framework for developing information requests.” Whatever that means.
  • Claimant 3 seems to have received the smallest share because “while helpful, Claimant 3’s information was not as significant to the overall success” of the case. 

We don’t know whether the three claimants worked as a single team while providing information and assistance to the SEC, or brought their concerns to the agency without any advance coordination among them. Nor do we know  which claimant might have been more senior to the other two. 

Anyway — if their firm took no action to address whatever misconduct these compliance officers saw, shame on management; and congratulations to these compliance officers for doing the right thing. 

Reporting misconduct to a regulatory agency is a difficult choice, one that leaves the reporter exposed to risk of retaliation and doesn’t guarantee any financial reward at the end of the journey. Plenty of people go to the SEC, suffer professional consequences, and still end up with no whistleblower award for various reasons. So good for these three, whoever they are.

(Of course, if any of the three see this post and you want to tell their story, drop me a line at [email protected] any time. Or if you’re attending the Society of Corporate Compliance & Ethics conference in a few weeks, we can get dinner. Obviously you’re picking up the tab.)

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