The Securities and Exchange Commission today announced an award of more than a million dollars to a compliance officer who believed that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.
“When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”
This is the second award the SEC has made to an employee with internal audit or compliance responsibilities.
While the specific details of this whistleblower case will not become publicly known because of the confidentiality provisions of the whistleblower program, we know from other recent SEC cases that individuals are being personally held liable, and in particular CCOs.
Therefore, those individuals who previously had concerns with a firm’s practices, or with risking their own potential liability for such practices, no longer have to feel they need to take such risks, and in fact now have strong financial incentives to come forward with their concerns. Firms that do not take compliance matters seriously or who want to take a “calculated business risk” should be concerned that individuals may no longer accept or be comfortable with the way things are being done and may now step forward to blow the whistle to the SEC.