The Securities and Exchange Commission has awarded its largest whistleblower award ever, worth $279 million, to an unidentified person who alerted the SEC to misconduct at a company that was already under investigation, according to the Wall Street Journal.
In keeping with government policy, the whistleblower and the company they blew the whistle on are both unnamed to protect the individual. The SEC credits the whistleblower with “expanding its probe and for providing ongoing assistance through written submissions and interviews” according to the Journal.
Whistleblower awards are typically 10-30% of fines collected from civil enforcement actions resulting from a tip. The previous record for a whistleblower’s payout was $114 million, less than half of the recent award.
The SEC noted that tips from the whistleblower also led to enforcement action by other federal agencies, which increased the award amount, although the SEC didn’t say by how much.
While there is nothing wrong with incentivizing individuals to come forward with information, a $279 million award seems excessive, especially considering the company was already under investigation by the SEC. Merely expanding the scope of an investigation should not make you a multimillionaire.
Since the total fine amount is unclear, its’ impossible to know if this award was closer to 10% or 30% of the total fine amount. If it was closer to 30%, the SEC should explain why the whistleblower couldn’t have been fairly compensated with a smaller award, as the remaining money could go toward further enforcement action.
If it was closer to 10%, then there should be a serious discussion about caps on the total award amount to ensure award are fair and enticing, but not outrageous.
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