On September 22, 2014, the SEC announced its largest whistleblower award to date under its Dodd-Frank whistleblower bounty program. It awarded $30-$35 million to an anonymous whistleblower who the Commission said provided original information about an ongoing fraud that would otherwise have been difficult to detect. That information led to the successful enforcement of an SEC action as well as unspecified related actions. The SEC stated that the whistleblower’s award would have been even higher if he/she had not unreasonably delayed in coming forward, though the agency did not apply the unreasonable delay consideration as severely as it otherwise would have because some of the delay occurred before the whistleblower program’s inception.
In its press release, the SEC indicated that, of fourteen total awards under the program, this was the fourth award made to a whistleblower living overseas, highlighting the program’s significant international reach. This was the first time the Commission released information about the proportion of foreign whistleblower award recipients under the bounty program, as opposed to just foreign tipsters, for whom participation has hovered around 10 percent.
This week’s announcement confirms the SEC’s position that non-U.S. citizens are eligible for whistleblower bounties under Dodd-Frank. In fact, the Commission made a point of stating in its award determination that, despite “certain extraterritorial aspects of the claimant’s application,” it takes the position that there is a “sufficient U.S. territorial nexus” under Morrison v. Nat’l Austl. Bank Ltd, 561 U.S. 247, 266 (2010) “whenever a claimant’s information leads to the successful enforcement of a covered action brought in the United States concerning violations of the U.S. securities laws….” The Commission distinguished Dodd-Frank’s anti-retaliation provision, stating that, although the Second Circuit recently held that a foreign whistleblower was not covered by that provision, the bounty provision has a different Congressional focus than the anti-retaliation provision, which is focused on protecting the employment relationship.
Based on the sheer size of this whistleblower award (indicating a corresponding government recovery of over $300 million), coupled with the SEC’s stated commitment to protecting whistleblower anonymity, the Dodd-Frank whistleblower program is increasingly likely to become the avenue of choice for future whistleblowers. While the size of this award has generated significant buzz and may put at least some naysayers’ concerns about the efficacy of the SEC whistleblower program to rest, the fact that there have been only a handful of awards despite well over 6,000 tips having been filed with the SEC may lead to lingering concern with the SEC’s administration of the whistleblower program.