One might assume that compliance workers are among the most common type of whistleblowers, due to the nature of their work. In fact, the SEC just awarded its third award to a compliance-related whistleblower in the history of the program in March of 2020.
Why so few awards, you may wonder, when the very job of such workers is to report illegal or suspicious activity? Simply put, most compliance individuals are not eligible when they discover wrongdoing in the course of their regular job activities—unless the following Exchange Act Rule restrictions apply.
- If there is reason to suspect that without intervention, the misconduct would cause substantial injury to the financial interest or property of the investors
- If there is significant misconduct taking place that would impede an investigation
- If a compliance officer or individual conducting an audit has reported to the in-house compliance organization and 120 days have elapsed with no change or investigation, the whistleblower may report the misconduct to the SEC
To maintain eligibility, individuals in compliance-related roles must submit original information, that is, information discovered through independent analysis. Note that if individuals in compliance learn of misconduct outside their usual job capacity, they can still be eligible.
In these circumstances, it is acceptable—even encouraged—for individuals to report wrongdoing to the SEC or the CFTC compliance programs. These individuals are eligible for the same 10% to 30% of the monies collected, if the situation meets all other requirements.
While it may seem risky to become a whistleblower, the monetary reward can prove worth it in the end. Some also find the moral component to be very satisfactory.