SEC Whistleblower Program: 5 Facts
The SEC has awarded over $500 million to 83 individuals since the whistleblower program began
The Securities and Exchange Commission just wrote a $50 million check to an individual who provided valuable information via the Whistleblower Program.
The payout is the largest single payout on record.
SEC WHISTLEBLOWER NETS $50 MILLION PAYOUT, MOST EVER
The program allows individuals to report potential violations of federal securities law without retaliation from an employer and without disclosing any information that would reveal a whistleblower's identity.
But how exactly did the program come about and how does it work? FOX Business explains.
History of the Whistleblower Program
The SEC's Whistleblower Program was established in 2011 under the Dodd-Frank Act in response to the 2008 financial crisis after investors lost billions, in part due to unchecked practices at big firms and runaway mortgage lending.
Since issuing its first whistleblower award in 2012, the SEC has doled out over $500 million to 83 individuals and enforcement actions from whistleblower tips have resulted in more than $2 billion returned to harmed investors, as detailed by the SEC.
Individuals are eligible for an SEC whistleblower award by providing "original, timely, and credible information that leads to a successful enforcement action."
Once a whistleblower submits a tip, the SEC will review the claim to determine if the agency should conduct its own investigation. If the claim is approved, the SEC will undertake its own due diligence.
If an enforcement action is successful, whistleblowers can file a claim to receive an award if monetary sanctions from the action exceed $1 million.
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Where does the money come from?
Awards are paid out from an investor protection fund established by Congress that is financed through monetary sanctions slapped on firms fined for securities law violations. The awards range from 10 to 30 percent of the money collected from sanctions exceeding $1 million.
Financial Awards Paid to Date
The SEC's largest payout to date to an individual was a $50 million award on June 4, 2020.
Other notable awards include $50 million in March 2018 that was split between two whistleblowers, $39 million to an individual whistleblower in September 2018 as well as $37 million to an individual in March 2019, and $33 million to an individual in March 2018.
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Top & Bottom States for Whistleblower tips
According to the SEC, more than 26,000 whistleblower tips have been given to the agency from 2011 to 2018.
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Which famous whistleblower was ignored by the SEC?
Despite his many warnings to the SEC about Bernie Madoff's Ponzi scheme, Harry Markopolos was repeatedly ignored by the agency after submitting a series filings to the agency between 2000 and 2005.
According to a report by the SEC's Office of Investigations detailing the timeline of Markopolos' tips, the agency said that Markopolos' 2005 filing detailed approximately 30 red flags indicating that Madoff was operating a Ponzi scheme.
An investigation by the OIG concluded that the red flags raised in Markopolos' filings "should have led to a thorough examination and/or investigation of the possibility that Madoff was operating a Ponzi scheme."
Harry Markopolos, the whistleblower
Source: John Tlumacki/The Boston Globe via Getty Images
After nearly a decade, Bernie Madoff was arrested in 2008 and was given a 150-year prison sentence in 2009. His story is the subject of at least two made for television productions in which Academy Award winners Robert De Niro and Richard Dreyfuss play Madoff separately.
BERNIE MADOFF'S EARLY PRISON RELEASE REQUEST NIXED
His appeal for an early release from prison due to a terminal illness was denied on June 4, 2020.
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