Calculating An Award Under The “Bounty Program”
If an SEC action results in sanctions totaling $1 million or more, the whistleblower is eligible to receive between 10% and 30% of any penalty recovered in a judicial or administrative action. For purposes of an award, the Final Rules make clear that the SEC will aggregate two or more smaller actions that arise from the same nucleus of operative facts to “make whistleblower awards available in more cases.” If there are multiple whistleblowers, the total compensation for all cannot exceed 30%. For example, one whistleblower could potentially receive an award equal to 25% of the penalty, and another could receive an award equal to 5% of the penalty, but they could not each receive an award equal to 30% of the penalty imposed.
In determining the amount of the award, the SEC will consider the following criteria that may increase the award:
• The significance of the information provided by the whistleblower;
• The assistance provided by the whistleblower;
• Law enforcement interest in making a whistleblower award; and
• Participation by the whistleblower in internal compliance systems.
The following criteria that may decrease an award will also be considered:
• Culpability of the whistleblower;
• Unreasonable reporting delay by the whistleblower; and
• Interference with internal compliance and reporting systems by the whistleblower.
No single criterion is determinative or mandatory.
Whistleblowers can appeal the denial of an award directly to a United States Circuit Court of Appeals, but cannot appeal the size of an award that is within the statutory range. See 15 U.S.C. § 78u–6(f).
Hat tip: An outstanding article that covers the law and final regulations in comprehensive fashion is Dodd-Frank and the SEC Final Rule: From Protected Employee To Bounty Hunter, ST001 ALI-ABA 1487 (July 28-30, 2011), which was written by Littler Mendelson, P.C. lawyers John S. Adler, Edward T. Ellis, Barbara E. Hoey, Gregory C. Keating, Kevin M. Kraham, Amy E. Mendenhall, Kenneth R. O’Brian, and Carole F. Wilder. This post is partially derived from that article.