What does it mean for whistleblower information to “lead to” successful SEC enforcement that gets a whistleblower paid?

Whistleblower awards are available only when information “leads to” a successful enforcement action. Under the SEC’s regulations, that criterion is satisfied in several different circumstances.

First, information leads to an enforcement action if it causes the SEC to open a new investigation, reopen a closed investigation, or pursue a new line of inquiry in an existing investigation, and the SEC subsequently obtains a recovery.

Second, information can satisfy the requirement if it “significantly contributes” to the success of an existing investigation, even if it does not cause the SEC to open or expand that investigation. For example, information might supply critical evidence that the SEC needs to prove its claims, such as the defendant’s knowledge that it made a false statement.

Finally, information leads to a successful enforcement action if the whistleblower reports it through an entity’s internal whistleblower program as well as to the SEC, the entity later reports the information to the SEC, and the information significantly contributes to an SEC investigation.

Awards are not available if the SEC does not use the whistleblower’s information in a way that meaningfully impacts its enforcement efforts.

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