SEC Issues Award To Whistleblower Despite Culpability And Delay

On July 27, 2017, the SEC announced that it was paying a $1.7 million bounty award to a whistleblower, even though the whistleblower: (1) had some culpability in the fraud; (2) unreasonably delayed reporting the fraud; and (3) failed to comply with a Dodd-Frank rule requiring whistleblowers to submit inside information in writing in certain circumstances. The SEC did not provide the identity of the whistleblower or the company at issue.

In its Order, the SEC wrote that in determining an appropriate award percentage, it balanced the fact that the whistleblower alerted it to a serious multi-year fraud that would have otherwise been difficult to detect with the whistleblower's unreasonable delay and culpability. The SEC noted that the whistleblower's unreasonable delay was somewhat mitigated because he first alerted the SEC to the fraud before the whistleblower program and the protections that accompany it were established by Dodd-Frank. The SEC also stated that it