Katz, Marshall & Banks Client Awarded $2.4 Million by SEC Whistleblower Office for Role in Stopping Manipulation of Mutual Fund Share Prices

The Securities and Exchange Commission awarded $2.4 million yesterday to a Katz, Marshall & Banks LLP client who assisted the Commission in stopping a mutual fund company’s illegal practice of manipulating the prices of mutual fund shares to the detriment of shareholders. The whistleblower is the 45th individual to receive an award through the program, and one of only 14 whistleblowers to receive a reported award greater than $2 million.

Congress created the SEC Whistleblower Program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the SEC program rules, an individual who voluntarily provides original information that leads to an enforcement action resulting in over $1 million in monetary sanctions is entitled to receive an award in the amount of 10 to 30% of the moneys collected. 

In issuing yesterday’s award, the SEC rewarded the whistleblower at the maximum of 30%, a level that reflected the significance of the information he submitted and his role in helping the SEC advance its investigation towards a successful enforcement action. While the SEC has not publicly disclosed the percentage, its order determining the award indicates that the SEC issued the highest award available because the whistleblower reported the improper conduct to the SEC “and then continued to provide the Commission with specific, timely, and credible information, helpful documents, significant ongoing assistance, and relevant testimony that accelerated the pace of the investigation.”

The SEC order and accompanying press release also pointed out that the whistleblower in this case is a public-sector employee. The SEC order noted that, while the SEC Whistleblower Program excludes participation by certain categories of government employees, “[g]enerally speaking, an employee of a federal, state, or local government agency can ... be eligible for an award under our whistleblower program.”

David Marshall and Michael A. Filoromo of Katz, Marshall & Banks, LLP, who represent the anonymous whistleblower, hailed the award. “This is a case where an ordinary person discovered serious and ongoing violations of securities laws and took action,” Mr. Marshall said. "Our client’s persistence allowed the SEC to take action to protect large numbers of shareholders, and also earned him a well-deserved reward. We are proud to represent a person like this who embodies the spirit and intent of the whistleblower program.”

“This award highlights the breadth and strength of the whistleblower program and the SEC’s commitment to rewarding those who help bring wrongdoers to justice,” Mr. Filoromo added. “The award shows that it does not matter whether a whistleblower is a high-level corporate insider or a civil servant. The most important thing is the quality of the information and assistance the whistleblower provides to the SEC in enforcing the nation’s securities laws.”