Workplace Issues

Corporate Officer Awarded Whistleblower Payout

The executive reported the violation after "other responsible compliance personnel possessed the information and failed to adequately address the i...
Vincent RyanMarch 3, 2015

The latest whistleblower award has a twist that CFOs may want to note.

A former company officer earned between $475,000 and $575,000  for reporting a securities fraud at his or her company “when it became apparent that the company’s internal compliance system was not functioning well enough to address it,” said the Securities and Exchange Commission.

Under the SEC’s whistleblower program, officers who learn about a fraud through another employee reporting the misconduct “generally aren’t eligible for an award under the SEC’s whistleblower program,” the commission said.

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But an exception to the rule makes an officer eligible if “he or she reports the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue,” said the SEC. “This is the first SEC whistleblower award to an officer under these circumstances.”

“This particular officer should be commended for stepping up to report a securities law violation when it became apparent that the company’s internal compliance system was not functioning well enough to address it,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.

The SEC said the whistleblower reported “original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.”

The SEC has now awarded 15 whistleblowers since its whistleblower program began more than three years ago. Payouts have totaled nearly $50 million out of an investor protection fund established by Congress.