SEC Awards Whistleblower $4M

The U.S. Securities and Exchange Commission is awarding over $4M to a whistleblower for providing original information that led to a successful fraud case. This is individual is the 34th whistleblower that the SEC’s program has awarded since 2011, upping the total amount granted in such awards to over $111M.

In what was the second biggest award issued by the regulator to date, he SEC awarded $22M to an to an ex- Monsanto Co. financial executive last month. The individual had reported alleged accounting violations involving Roundup, the company’s weed killer. According to media reports, Monsanto offered distributor rebates to raise sales but moved the costs into the following fiscal year. As a result, the company moved up its revenue while postponing the reduction that resulted from the costs.

Under the SEC Whistleblower program, individuals who voluntarily give the regulator unique information that leads to a successful enforcement case are entitled to 10-30% of the sanctions collected when that amount is over $1M. Since the program’s inception five years ago, the Commission has received over 14,000 tips.

The SEC is not the only regulator availing of whistleblowers. The New York Times reports that to date securities regulators in two states are also getting whistleblower help to protect residents and enforce their own statutes related to fraud.

Just last month, a whistleblower was awarded $95K for helping securities regulators in Indiana file an enforcement case against JPMorgan Chase (JPM). The bank was accused of not revealing certain conflicts of interest to clients about the way that their money had been invested. The information that the informant notified the state about certain improper actions, including the directing of clients to in-house funds that were either costlier or paid JPMorgan higher fees. (In a parallel case, JPMorgan paid the SEC $307M to settle charges accusing the bank of making $127M in ill-gotten gains while guiding clients toward affiliated funds.)

The bank settled the case with Indiana by paying $950K. This was the first award granted under Indiana’s whistleblower program.

Utah also has a whistleblower program geared toward helping identify and report violations of state securities laws. There, enforcement actions leading to at least $30K in sanctions can render an informant up to 30% of what is collected. In 2014, the state awarded an investment adviser $20K for notifying officials of about some $150K in suspect transactions in one older client’s holdings. Utah was able to recover the funds.

Meantime, the U.S. Commodity Futures Trading Commission is considering expanding its whistleblower rules. It wants public comments about the amendments it is proposing that would grant the regulator the authority to act against employers who try to get back at whistleblowers. How much the CFTC could award to whistleblowers may increase.

To date, the CFTC has issued four whistleblower awards since its inception in 2011, including approximately $50K that was awarded last month, an over $10M award issued in April, a $290K award last year, and a $240K award in 2014.

At The SSEK Partners Group, our securities lawyers represent investors seeking to recoup their fraud losses. Contact us today. Your initial case consultation is free.

Read the SEC Order about the Whistleblower Award (PDF)

To Crack Down on Securities Fraud, States Reward Whistleblowers, NY Times, August 21, 2016

CFTC Seeks Public Comment on Proposed Whistleblower Rule Amendments, CFTC, September 1, 2016