On March 2, 2015, the SEC announced a whistleblower bounty award of between $475,000 and $575,000, its 15th under the Dodd-Frank whistleblower program. While the SEC’s order is scant on detail, it does disclose that the award will go to a corporate officer, making it the first award to go to an officer under the program. This award is in keeping with the SEC’s approach to demonstrate in the relatively small number of awards made to date that a broad range of individuals can get bounties for providing original information of corporate wrongdoing under Dodd-Frank.
Generally under Dodd-Frank, officers, directors, trustees, and partners of an entity are ineligible for awards when they either learn of the alleged violations from others or “in connection with the company’s process for identifying, reporting, and addressing possible violations of law.”
But there are three exceptions to this general rule. These individuals may qualify for a bounty if (1) disclosure is necessary to prevent “substantial injury”; (2) the company is impeding an investigation; or (3) at least 120 days have gone by since they provided the information to a supervisor, the company’s audit committee, chief legal officer, chief compliance officer or their equivalents, or at least 120 days have gone by since they received the information, if they received the information under circumstances indicating that one or more of these individuals or committees was already aware of the information.
Here, the SEC stated that the whistleblower’s report fell within the third, 120-day, exception. The Commission offered no details on the efforts, if any, the corporate officer made to ensure that the alleged violations were addressed internally before blowing the whistle to the agency after 120 days. Nor did the SEC disclose what percentage the bounty represented within the 10%-30% range for bounty awards.
This latest whistleblower award serves as a stark reminder that even individuals at the very highest levels of company management may qualify for a whistleblower bounty if the organization does not investigate and address issues within a 120-day period. It is critical in this Dodd-Frank era that companies have effective mechanisms for receiving and promptly investigating whistleblower complaints before top company officials have incentives to report issues to the SEC in pursuit of hefty monetary rewards.