SEC hands down $5.5m whistleblower award in first-of-its-kind case

By Kathryn Higgins

11 January 2017 at 15:39 BST

The US Securities and Exchange Commission has waived its requirement for 'in writing' tips for the first time.

Citing ‘highly unusual circumstances’, the SEC decided to award more than $5.5m to whistleblower who had acted as an ongoing tipster for the watchdog, despite none of the tips being submitted in writing. The SEC’s whistleblower program established in 2010 under Dodd-Frank and launched in 2011, required all tips to be submitted either physically or electronically in writing in order to be eligible for an award. This whistleblower, however, had provided information to the SEC ongoingly during the interim period between the creation of Dodd-Frank and the launch of the whistleblower program in a manner ‘expressly requested’ by enforcement staff. Though it’s not clear what form the tips took, the SEC conceded that they were not in writing – ‘an omission that might ordinarily require an award denial,’ it said.

Former SEC chief Sean McKessy said that the decision by the SEC, which is the second time it has waived a formal requirement, is testament to the agency’s ability to be flexible if it means getting results: ‘The big picture message that this sends is the commission is a body that has discretionary authority to do what justice requires,’ he told The National Law Journal. ‘If the equities determine it, or if the equities demand it, the commission can be persuaded to waive the requirements to get a just result.’ The SEC whistleblower program has so far paid out $142m to 38 whistleblowers since its inception.

Sources: The National Law Journal; The National Law Review


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