The U.S. Securities and Exchange Commission has issued its sixth whistleblower payment, awarding a tipster $150,000 for helping to stop a scheme that was defrauding investors.
The Oct. 30 payment comes one month after the SEC awarded a record $14 million to another anonymous whistleblower. Lawyers see the payments as a clear sign that the program continues to pick up steam.
"The awards we’ve seen now are just the tip of the iceberg," said Proskauer Rose partner Steven Pearlman, who represents corporate defendants as head of the firm's whistleblower and retaliation practice.
Plaintiffs lawyer Stanley Bernstein, a founding partner at Bernstein Liebhard, agreed. “It’s pretty clear the pipeline is beginning to open up,” he said. “We have a lot of whistleblower tips in various stages before the SEC, from the beginning to quite advanced.”
The SEC provided scant details of the most recent case, stating in a news release that the person “provided significant information that allowed the SEC to quickly open an investigation and obtain emergency relief before additional investors were harmed.”
The informant was awarded the maximum bounty – 30 percent of the money collected by the SEC.
The SEC's whistleblower began operating in August 2011, created as part of the Dodd-Frank Act. Whistleblowers who provide information that leads to a successful SEC action are entitled to an award of 10 to 30 percent of the monetary penalty the agency collects.
Plaintiffs firm Labaton Sucharow earlier this year commissioned a survey of financial industry professionals and found that 89 percent said they’d be willing to report wrongdoing to the SEC once they understood it could be done anonymously, that they were protected against retaliation and that they could receive a monetary award.
The survey also found that 60 percent of employees were aware of the whistleblower program, up from 44 percent in 2012.
The survey was done before the $14 million award on Oct. 1, which the SEC said went to a person who “provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible.”
Since then, Labaton partner Jordan Thomas said the firm has seen “an increase in the number of consultations. It’s logical – the greater the awareness, the more tips.”
The first SEC whistleblower award of $50,000 was issued in August 2012. In June, three whistleblowers were awarded 15 percent of the money that the SEC ultimately collects from its enforcement action against hedge fund Locust Offshore Management LLC and its CEO Andrey Hicks.
Catherine Foti, a partner at Morvillo Abramowitz Grand Iason & Anello, praised the SEC for taking pains to preserve the anonymity of the whistleblowers--none of whom have been willing to be publicly identified.
“Threats of retaliation always exist and there's no guarantee that providing a tip will actually lead to a payout, even where the wrongdoing is proven,” she said. “Although these tips can be lucrative, most people still need to be employed and the stigma of having been a whistleblower may impact their ability to keep their jobs or obtain future employment."
Comments