SEC bans pair for pointless whistleblower filings

The downside of the U.S. Securities and Exchange Commission’s (SEC) successful whistleblower program, which has paid more than US$1 billion to tipsters, is the potential for frivolous award claims.

The SEC has banned two people from its whistleblower award program, noting that they each have filed “hundreds of frivolous award applications.”

The banned individuals, not named by the regulator, have repeatedly sought awards from the SEC with applications that “bore no relation to the underlying enforcement action for which they were applying,” the regulator said in a release.

These filings consumed SEC staff time and resources, it said, which hindered the program’s efficiency and didn’t help bring any enforcement action.

The SEC said the individuals were repeatedly warned to stop submitting frivolous filings, but that they refused to do so. As a result, the two people were banned under provisions that were adopted in 2020 to improve the program’s operation.

“Frivolous award applications hamper our ability to efficiently process awards to meritorious whistleblowers who come forward with helpful information intended to assist law enforcement,” said Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower.

“Today’s permanent bars send an important message that frivolous award filers will not be tolerated,” she added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.