First SEC Award Paid Under the “Safe Harbor” Rule

A former company insider will be awarded more than $2.2 million by the SEC for providing crucial information that led to a substantial Securities and Exchange Commission (SEC) enforcement action. The whistleblower reported their information to the SEC after telling another federal agency first, but because they conveyed the information within a 120-day grace period, they will be given the SEC award under the “safe harbor” provision of Exchange Act Rule 21F-4(b)(7). It is the first time that an award has been given under this provision.

The “safe harbor” portion of Exchange Act Rule 21F-4(b)(7) stipulates that, should a whistleblower provide information to another agency but also give the SEC the same material within 120 days, then the SEC will consider the information to have been submitted simultaneously with the other agency. Ordinarily, a whistleblower must provide the SEC with original information, meaning that the SEC must receive it first. But under “safe harbor,” a whistleblower is not disqualified from receiving an SEC award even if they report the information to another federal agency first, as long as they provide the SEC with the same material within 120 days. The other federal agency must be covered under the same Rule as the SEC.

In this specific case, the whistleblower reported what they knew to the first agency, which then determined the matter should be referred to the SEC. The SEC opened an investigation, after which the whistleblower told the SEC what they knew within 120 days. They also significantly cooperated with the ensuing investigation.

In the SEC’s April, 2018, press release reporting the award, the Chief of the SEC’s Office of the Whistleblower, Jane Norberg, explained, “Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies. This award shows that whistleblowers can still receive an award if they first report to another agency, as long as they also report their information to the SEC within the 120-day safe harbor period and their information otherwise meets the eligibility criteria for an award.”

In some ways, this case may remind you of the situation where a whistleblower first reports internally to their company but does not inform the SEC. During February, 2018, regarding Digital Realty Trust v. Somers, the Supreme Court held that a whistleblower is not eligible for the anti-retaliation protections provided by the Dodd-Frank Act if they report information solely internally and not to the SEC. However, the specifics of the Digital Realty case and this one are quite different.

The “safe harbor” provision will likely incentivize whistleblowers to report what they know, especially so now that the $2.2 million award has been announced. Even if the whistleblower is not sure which federal agency they should contact, the fact that a whistleblower received an award under the “safe harbor” provision should serve as an encouragement to others.

To date, 54 whistleblowers have received more than $264 million from the SEC since the first award was issued in 2012. By law, the SEC must protect a whistleblower by not revealing information that could lead to disclosing a whistleblower’s identity, either directly or indirectly.

Blowing the Whistle? We Can Help You with Your Next Step.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.

Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.

For a free, confidential evaluation of your case, call the Louthian Law Firm today or, if you prefer, use our online contact form.