Business Insurance reported late last week that the Securities and Exchange Commission will award $5-6 million to a whistleblower who provided information on securities violations that would have been “nearly impossible” for the SEC to detect on its own. Such an award would be the third larges award ever granted to a whistleblower by the SEC. This also comes on the heels of a $3.5 million whistleblower award from the week before.
The takeaway is that the SEC continues to heavily incentivize company insiders to report possible securities violations. It is critical to have internal controls and monitoring to catch these problems before a whistleblower runs into the SEC. Self-reporting can drastically reduce exposure to damages and fines, but if you do not have proper compliance checks in place, you may never even catch the problem yourself. Routine internal investigations and a rigorous compliance and monitoring system will go a long way to preventing and spotting securities issues early, and thereafter managing and mitigating the fallout.