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SEC Issues First Whistleblower Award of $2.2 Million Under Safe Harbor Rule

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The Securities and Exchange Commission, or SEC, announced in April that it issued an award of $2.2 million to a whistleblower for the first time under what’s known as the ‘safe harbor’ rule. The whistleblower’s tip to one federal agency resulted in an SEC enforcement action.

The whistleblower reported information to a federal agency that is covered under the Securities Exchange Act of 1934, Section 21F. This was amended in 2010 with the Dodd Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act). The SEC Regulation 21F covers whistleblowers who submit information to one federal agency and then to the SEC. If the information is submitted within 120 days of the original submission to the other federal agency, the SEC will treat it as though it was submitted at the same time.

In this particular case, the whistleblower was a former company insider who made a report to one federal agency. That particular agency referred the matter to the SEC who began its own investigation. The whistleblower then reported the information to the SEC directly on their own and continued to provide helpful information during the investigation. Even though the SEC had opened an investigation, the report was within the 120-day window. This means the safe harbor rules apply and the SEC will treat the report the same as if it had been reported directly to them

Due to confidentiality laws, the SEC has not released the name of the whistleblower nor details on the enforcement action that came from the report. The award was based on the SEC Act Rule 21F-6 which allows the SEC to consider the importance of the information supplied when approving the proposed award amount.

History of Dodd Frank Act

The Dodd Frank Act was signed into law in 2010 by President Obama. It was passed in response to the 2008 financial crisis. The act placed restrictions on lenders and mortgage companies to prevent them from taking advantage of borrowers. The Act takes its name from Senator Chris Dodd and U.S. Representative Barney Frank who introduced the bill revisions.

It’s connected to the whistleblower program in that the SEC will pay awards to eligible whistleblowers who voluntarily come forward and provide important and original information to the SEC that results in a successful enforcement action. The action must yield monetary sanctions that exceed one million dollars.

Importance of Retaining SEC Whistleblower Attorney

The laws surrounding whistleblower actions are complex and very strict. In this particular case, had the whistleblower not reported the information to the SEC directly, they would’ve been ineligible for an award. It’s important to retain a Florida SEC whistleblower attorney right away if you believe you have crucial information that could result in an SEC enforcement action.

The SEC’s Office of the Whistleblower is relatively new and that’s why it’s important to retain an attorney who has significant knowledge on these types of cases. The attorneys at McCabe Rabin, P.A. have years of experience handling a variety of whistleblower matters. Contact our West Palm Beach office at 561-659-7878 to schedule a consultation today.

Resources:

cftc.gov/LawRegulation/DoddFrankAct/index.htm

sec.gov/spotlight/dodd-frank/whistleblower.shtml

sec.gov/rules/other/2018/34-82996.pdf

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