A whistle-blower, whose identity was not disclosed, has been awarded over US$30M by the SEC, despite being neither a citizen nor a resident of the US. The award was for voluntarily providing information that led to a successful prosecution by the SEC for breaches of US securities law. The award was calculated as a percentage of the monetary sanctions imposed by the SEC, although the actual percentage used was not disclosed.
Global corporates should therefore be aware that their employees worldwide can be incentivised to blow the whistle on US securities law violations wherever they occur.
There were several points to note:
The SEC takes the view that whenever a claimant’s information leads to successful enforcement of US securities law there is sufficient US territorial nexus for an award to be made. According to the SEC, “it makes no difference whether [ ] the claimant was a foreign national,[ ] resides overseas, the information was submitted from overseas or the misconduct [ ] occurred entirely overseas.” They considered that this approach best reflected Congress’ purpose behind the award programme which was to encourage individuals with knowledge of US securities law violations to come forward.
In this particular case the SEC said that the award would have been higher still if the whistle-blower had reported to them sooner. His delay in doing so, for the stated reason that he was not sure the SEC would act, was regarded by the SEC as unreasonable. During this delay, investors continued to suffer harm that might have been avoided. This is a clear steer that people considering whistleblowing to the SEC should act promptly once they become aware of violations.
On the question of the size of these kinds of award the SEC stated that it will take a highly individual case by case approach, taking account of all the particular facts and circumstances of each matter. This precludes any meaningful comparisons between different awards.
The SEC noted that several claims brought by foreigners in the US courts under the US anti-retaliation provisions – which protect whistleblowing employees from employer retaliation – had recently failed on the grounds of a lack territorial nexus. The SEC did not consider those court decisions binding on it as the anti-retaliation provisions had a different “Congressional focus” and dealt primarily with the employment relationship.