SEC rewards one tipster, denies another

The U.S. Securities and Exchange Commission (SEC) awarded US$5 million to a whistleblower, while denying a claim, in the same case, from another tipster that had filed their own tip three years earlier.

According to the regulator’s decision, the recipient of the US$5 million award provided a tip to the regulator that prompted an investigation, and supplied additional information that “helped SEC staff shape its investigative strategy, identify witnesses, and draft document and information requests.”

The whistleblower also reported their concerns internally before submitting information to the SEC, it noted.

“­Th­­­­­­­­­e whistleblower in this case provided helpful information and substantial ongoing assistance, saving the SEC time and resources during its investigation,” said Creola Kelly, chief of the SEC’s office of the whistleblower.

At the same time, the regulator’s order upheld a preliminary decision denying an award to a second claimant in the same case.

According to its order, the other tipster had provided their tip to the SEC three years before the regulator actually launched an investigation, and didn’t prompt any enforcement action.

At the time, SEC staff reviewed the tip, “but the allegations were vague and conclusory, and staff closed the tip with no further action,” the order said.

In appealing that initial decision, the tipster argued that they were the “original source” of the information that led to the SEC’s investigation because they had shared the contents of their tip with law firms while trying to hire legal counsel.

However, the SEC ruled that this claim was speculative, and was not supported by the evidence — and it rejected the notion that the purported tipster should be treated as a joint whistleblower with the person who actually received an award.

The regulator upheld its initial conclusion that the earlier tip didn’t contribute to the investigation, or provide information that led to successful enforcement action.

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.