In what should serve as a cautionary tale for public companies, on March 19, the Securities and Exchange Commission (“SEC”) announced its largest ever Dodd-Frank whistleblower awards – totaling more than $83 million in payouts – with two whistleblowers splitting a nearly $50 million reward, and a third individual receiving more than $33 million. See SEC Release No. 82897 (Mar. 19, 2018). Jane Norberg, Chief of the SEC’s Office of the Whistleblower, said, “we hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.”
While the SEC does not comment on the specific details of the underlying enforcement actions that lead to whistleblower awards, the Wall Street Journal reported that the payouts related to a $415 million settlementbetween the SEC and a financial institution. The settlement arose out of “an SEC investigation [that] found [the financial institution] violated the SEC’s Customer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account” that “freed up billions of dollars per week from 2009 to 2012 that [the financial institution] used to finance its own trading activities.”Read more here.