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SEC Adds Clarity, Efficiency and Transparency to Its Successful Whistleblower Award Program

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Washington, D.C.–(Newsfile Corp. – September 23, 2020) – The Securities and Exchange Commission today voted to adopt amendments to the rules governing its whistleblower program that are designed to provide greater clarity to whistleblowers and increase the program’s efficiency and transparency. Concurrently, to provide additional efficiencies, as well as clarity and transparency in the award determination process, the SEC’s Office of the Whistleblower published guidance regarding the process for determining award amounts for eligible whistleblowers.   

The SEC’s whistleblower program was created to incentivize individuals to report high-quality tips to the Commission and assist the agency in its efforts to combat wrongdoing and, as a result, better protect investors and the marketplace.  Since the program’s inception ten years ago, whistleblowers have made a significant impact on the Commission’s enforcement efforts and protection of investors. Original information provided by whistleblowers has led to enforcement actions in which the Commission has obtained over $2.5 billion in financial remedies, most of which has been, or is scheduled to be, returned to harmed investors. 

The SEC has awarded approximately $523 million to 97 individuals since the program began, and it has worked over the years to improve the program’s efficiency and increase incentives for whistleblowers. In the past three and a half years, the agency has made the five top largest awards in the program’s history – two at $50 million, and one each at $39 million, $37 million, and $33 million. It has also increased the pace at which it has been processing claims and making awards.  This year so far, even with the challenges presented by COVID-19, the Commission has processed more claims than in any previous year. 

“The Commission’s enforcement efforts, and most importantly, American investors and markets, have greatly benefitted from the credible information and assistance that whistleblowers have provided,” said SEC Chairman, Jay Clayton. “Whistleblowers often take professional and reputational risks in reporting their information to the SEC and we are committed to rewarding them for taking those risks and contributing to our enforcement efforts.  Today’s rule amendments will help us get more money into the hands of whistleblowers, and at a faster pace.  Experience demonstrates this added clarity, efficiency and transparency will further incentivize whistleblowers, enhance the whistleblower award program and benefit investors and our markets.” 

The amendments to the whistleblower rules are intended to provide greater transparency, efficiency and clarity, and to strengthen and bolster the program in several ways.  The rule amendments increase efficiencies around the review and processing of whistleblower award claims, and provide the Commission with additional tools to appropriately reward meritorious whistleblowers for their efforts and contributions to a successful matter. 

Among other enhancements, the amendments provide a mechanism for whistleblowers with potential awards of less than $5 million (which historically have represented nearly 75% of all whistleblower awards), subject to certain criteria, to qualify for a presumption that they will receive the maximum statutory award amount.  Other awards will continue to be evaluated consistent with past practice. 

The amendments also affirm that award amounts—which the Commission, in its discretion, can determine in percentage terms, dollar terms or some combination—are to be determined exclusively based on the application of the award factors set forth in the Commission’s whistleblower rules.  In other words, there is not a separate (post application of the award factors) assessment of whether award amounts are too small or too large.  The amendments further clarify that the Commission may waive compliance with the TCR filing requirements if a whistleblower complies with the requirements within 30 days of first providing the information or of first obtaining actual or constructive notice of the TCR filing requirements. 

The whistleblower rule amendments will become effective 30 days after publication in the Federal Register.

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FACT SHEET
SEC Open Meeting
September 23, 2020

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Background

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 21F to the Securities Exchange Act of 1934 (the “Exchange Act”), establishing the Commission’s whistleblower program.  Among other things, Section 21F authorizes the SEC to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions over $1 million.  

Awards must be made in an amount equal to not less than 10 percent, and not more than 30 percent, of the monetary sanctions collected in the covered SEC action and certain related actions.  The amendments clarify that the form of an action—e.g., settlement agreements, deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs)—will not affect whether the action is a covered action or a related action.  The amendments also codify the Commission’s historic approach to determining whether an action is a related action, including clarifying that a law-enforcement or separate regulatory action does not qualify as a “related action” if the Commission determines that there is a separate award scheme that more appropriately applies to such law-enforcement or separate regularly action.    

Congress established a separate fund at the Treasury Department, called the Investor Protection Fund (IPF), from which whistleblower awards are paid.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

The whistleblower rule amendments make certain modifications and clarifications to the existing rules, as well as several technical amendments. 

Highlights

Additional Tools in Award Determinations

  • Presumption of the statutory maximum award amount for certain awards of $5 million and less:  Historically, approximately 75% of the awards given out in the whistleblower program have been $5 million or less. 
    • For awards where the statutory maximum award amount for the covered action and any related actions is in the aggregate $5 million or less, the Commission is adding Exchange Act Rule 21F-6(c) to provide a presumption that the Commission will pay a meritorious claimant the statutory maximum amount where none of the negative award criteria specified in Rule 21F-6(b) are present, subject to certain limited exceptions. 
    • For awards over $5 million, the Commission will continue to analyze the award factors identified in Rule 21F-6 and issue awards based on the application of those factors.  Based on the historical application of the award factors, if none of the negative criteria specified in Rule 21F-6(b) are present, the award amount would be expected to be in the top third of the award range. 
    • After carefully considering the comments received, the Commission has determined not to adopt proposed Exchange Act Rule 21F-6(d)(2), which would have provided a formalized process for the Commission to conduct an enhanced review of certain awards. 
       
  • Allowing awards based on deferred prosecution agreements (“DPAs”) and non-prosecution agreements (“NPAs”) entered into by the U.S. Department of Justice (“DOJ”), or a settlement agreement entered into by the Commission outside of the context of a judicial or administrative proceeding to address violations of the securities laws:  This amendment will ensure that whistleblowers are not disadvantaged because of the particular form of an action that the Commission or DOJ may elect to pursue.  Under the amendment, the Commission would be able to make award payments to whistleblowers based on money collected as a result of such DPAs and NPAs, as well as under settlement agreements entered into by the Commission outside of the context of a judicial or administrative proceeding to address violations of the securities laws. 
    • The amendment to the definition of “action” to include NPAs, DPAs, and similar Commission settlement agreements will apply to any such agreement that was entered into after July 21, 2010 (the date the Dodd-Frank Act became effective).  Individuals will have 90 days from the effective date of the amendments to apply for an award in connection with any such agreement that was entered between the July 2010 date and the effective date of the amendments.
       
  • Clarifying the current definition of “related action”: This amendment codifies the Commission’s approach to determining whether an action is a related action, including clarifying  that a law-enforcement or separate regulatory action does not qualify as a “related action” if the Commission determines that there is a separate award scheme that more appropriately applies to such law-enforcement or separate regulatory  action.   The presence of such a separate award scheme would not affect the Commission’s determination of the award based on the monetary sanctions collected by the Commission in the covered SEC action and any related action where such an award scheme was not present. 

Uniform Definition of “Whistleblower”

In response to the Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers, the Commission is modifying Rule 21F-2 to establish a uniform definition of “whistleblower” that will apply to all aspects of Exchange Act Section 21F—i.e., the award program, the heightened confidentiality requirements, and the employment anti-retaliation protections. 

  • For purposes of retaliation protection, an individual is required to report information about possible securities laws violations to the Commission “in writing.”  As required by the Supreme Court’s decision, to qualify for the retaliation protection under Section 21F, the individual must report to the Commission before experiencing the retaliation. 
     
  • To be eligible for an award or to obtain heightened confidentiality protection, the additional existing requirement that a whistleblower submit information on Form TCR or through the Commission’s online tips portal remains in place, subject to the additional discretion of the Commission to grant waivers described below. 
     
  • Additionally, the Commission is issuing interpretive guidance defining the scope of retaliatory conduct prohibited by Section 21F(h)(1)(A), which includes any retaliatory activity by an employer against a whistleblower that a reasonable employee would find materially adverse.

Increased Efficiency in Claims Review Process

The new presumption for certain awards of $5 million or less, described above, should result in gains in efficiency from streamlining the award determination process for those awards. Two further amendments are designed to help increase the Commission’s efficiency in processing whistleblower award applications.

  • New subparagraph (e) to Exchange Act Rule 21F-8 codifies the Commission’s practice of barring applicants who submit materially false, fictitious, or fraudulent statements in their whistleblower submission, in their other dealings with the Commission, or in related actions, and provides an important new tool for the Commission in processing frivolous award applications. 
    • To prevent repeat submitters from abusing the award application process, the rule permits the Commission to permanently bar any applicant from seeking an award after the Commission determines that the applicant has abused the process by submitting three frivolous award applications. 
    • For the first three applications determined to be frivolous, the Office of the Whistleblower will notify a claimant of its assessment and give the claimant the opportunity to withdraw the application.
       
  • New Exchange Act Rule 21F-18 affords the Commission with a summary disposition procedure for certain types of common denials, such as untimely award applications, applications that involve a tip that was not provided to the Commission in the form and manner that the rules require, and applications where the claimant’s information was never provided to or used by staff responsible for the investigation. 
    • The more streamlined process is designed to help facilitate a more timely resolution of such relatively straightforward denials, while freeing up staff resources to focus on processing potentially meritorious award claims.  Claimants will still have an opportunity to contest a preliminary denial of their claim before the Commission makes its final determination.

Clarification and Enhancement of Certain Policies and Procedures

The rule amendments also clarify and enhance certain policies, practices, and procedures in implementing the program. These amendments include the items listed below.

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  • Exchange Act Rule 21F-4(e) is amended to clarify the definition of “monetary sanctions,” codifying the Commission’s current understanding and application of that term.
     
  • Section 21F of the Exchange Act provides that the determination of the amount of an award is in the discretion of the Commission.  Exchange Act Rule 21F-6 is amended to clarify the Commission’s discretion in applying the award factors and setting the award amount, including the discretion to apply the award factors in percentage terms, dollar terms or some combination thereof.  The amendments also confirm that the Commission will consider only the enumerated award factors set forth in the rule when determining the award amount.
     
  • Exchange Act Rule 21F-9 is amended to provide the Commission with additional flexibility to modify the manner in which individuals may submit Form TCR (Tip, Complaint or Referral). 
    • Further, the amendment clarifies that the Commission may waive compliance with Rule 21F-9(a) and (b) for a meritorious whistleblower who provided a Form TCR:
      • within 30 days of first providing the information that he or she relies upon as a basis for a claim, or
      • within 30 days of first obtaining actual or constructive notice about those requirements (or 30 days from the date the whistleblower retains counsel to represent him or her in connection with the submission of original information, whichever occurs first). 
    • The waiver of non-compliance with Rule 21F-9(a) and (b) is automatic, rather than discretionary, when the Commission finds that the whistleblower has established that the specified conditions are satisfied.
    • The Commission continues to retain its separate discretionary exemptive authorities under Rule 21F-8(a) and Exchange Act Section 36(a) for circumstances that may warrant exemptive relief. 
       
  • Exchange Act Rule 21F-8 is amended to provide the Commission with additional flexibility regarding the forms used in connection with the whistleblower program.
     
  • Exchange Act Rule 21F-12 is amended to clarify the list of materials that the Commission may rely upon in making an award determination.
     
  • Exchange Act Rule 21F-13 is amended to clarify the materials that may comprise the administrative record for purposes of judicial review.

Commission Interpretive Guidance

In addition to the foregoing rule amendments, the Commission is publishing interpretive guidance to help clarify the meaning of “independent analysis” as that term is defined in Exchange Act Rule 21F-4 and utilized in award applications. 

  • Under the guidance, in order to qualify as “independent analysis,” a whistleblower’s submission must provide evaluation, assessment, or insight beyond what would be reasonably apparent to the Commission from publicly available information. 
     
  • In making that determination, the Commission will consider whether the whistleblower’s conclusion of possible securities violations derives from multiple sources, including sources that are not readily identified and accessed by a member of the public without specialized knowledge, unusual effort, or substantial cost, and the sources collectively raise a strong inference of a potential securities law violation that is not readily inferable by the Commission from any of the sources individually.

Finally, the Commission has decided not to adopt a specific time-based presumption of “unreasonable delay” as interpretive guidance.  The Commission will continue to assess the facts and circumstances of each case to determine whether any delay was reasonably attributable to actions taken by or circumstances out of the control of the whistleblower or to unreasonable actions by the whistleblower.

Guidance from the Office of the Whistleblower

Over the past several years, the Office of the Whistleblower and the Division of Enforcement have worked to streamline and substantially accelerate the evaluation of claims for whistleblower awards and there has been substantial improvement in this regard.  To provide additional efficiencies, as well as clarity and transparency in the award determination process, the Office of the Whistleblower has contemporaneously issued staff guidance regarding the process for determining award amounts for eligible whistleblowers.  This guidance is publicly available on the SEC’s web page for the Office of the Whistleblower.

The guidance reflects the Office of the Whistleblower’s experience with the program as well as the implementation of the amendments adopted today, and it sets forth the process for the Office of the Whistleblower to propose award amounts to the Claims Review Staff, which issues a preliminary determination that is subject to Commission review.  The discretion to apply the award factors and set the award amount remains with the Commission. 

The guidance sets forth that, for awards where the statutory maximum award amount for the covered action and any related actions is in the aggregate $5 million or less, the proposed amount will be the statutory maximum where none of the negative award criteria specified in Rule 21F-6(b) are present, subject to certain limited exceptions as set forth in the rule. 

For awards over $5 million, the Office of the Whistleblower will continue to analyze the factors identified in Rule 21F-6 and propose award amounts based on the application of the award factors.  Historically, if none of the negative criteria specified in Rule 21F-6(b) were present, the majority of awards have been in the top third of the award range. 

The Office of the Whistleblower will continue to make available on its webpage (www.sec.gov/whistleblower) information regarding its approach to processing whistleblower award claims.

Additional Information to Congress

The Commission also directed the Office of the Whistleblower to include in its annual reports to Congress (beginning with the upcoming FY 2020 report), in an aggregated manner, an overview discussion of the factors that were present in the awards throughout the year, including (to the extent practicable) a qualitative discussion of how these factors affected the Commission’s determination of award amounts.

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The amendments to the whistleblower rules become effective 30 days after publication in the Federal Register.

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Fintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA)

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As we close out 2024, the fintech industry continues to deliver headlines that underscore its dynamism and innovation. From IPO aspirations to groundbreaking regulatory milestones, today’s updates highlight the transformative power of fintech partnerships, regulatory evolution, and disruptive technologies. Here’s what you need to know.

Chime’s Quiet Step Toward Public Markets

Chime, the U.S.-based financial technology startup best known for its digital banking services, has taken a significant step by filing confidential paperwork for an initial public offering (IPO). As one of the most valuable private fintechs in the U.S., Chime’s move could potentially signal a renewed appetite for fintech IPOs in a market that has been cautious following fluctuating valuations across the tech sector.

With a valuation that reportedly exceeded $25 billion in its last funding round, Chime’s IPO could set a new benchmark for the industry. Observers note that its strong customer base and revenue growth may make it an appealing choice for investors seeking to capitalize on the digital banking boom. However, the timing and success of the IPO will depend on broader market conditions and the regulatory landscape.

Source: Bloomberg

ZBD’s Pioneering Achievement: EU MiCA License Approval

ZBD, a fintech company specializing in Bitcoin Lightning network solutions, has made history by becoming the first to secure an EU MiCA (Markets in Crypto-Assets Regulation) license. This landmark approval by the Dutch regulator positions ZBD at the forefront of compliant crypto-fintech operations in Europe.

MiCA, which aims to harmonize the regulatory framework for crypto-assets across the EU, has been a focal point for industry players aiming to establish legitimacy and expand their offerings. ZBD’s achievement not only validates its operational rigor but also sets a precedent for other fintech firms navigating the evolving regulatory landscape.

Industry insiders view this as a strategic advantage for ZBD as it broadens its footprint in Europe. By leveraging its regulatory approval, the company can accelerate its product deployment and establish trust with institutional and retail users alike.

Source: Coindesk, PR Newswire

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The Fintech-Credit Union Synergy: A Blueprint for Innovation

The convergence of fintechs and credit unions continues to reshape the financial services ecosystem. Collaborative initiatives, such as the one highlighted in the recent partnership between fintech innovators and credit unions, are proving to be a potent force in delivering tailored financial solutions.

This “dream team” approach allows credit unions to leverage fintech’s technological expertise while maintaining their community-focused ethos. Key areas of collaboration include digital payments, personalized financial management tools, and enhanced loan processing capabilities. These partnerships not only enhance member engagement but also enable credit unions to remain competitive in an increasingly digital-first financial environment.

Industry analysts emphasize that such collaborations underscore a broader trend of traditional financial institutions embracing fintech-driven solutions to bridge service gaps and foster innovation.

Source: PYMNTS

Tackling Student Loan Debt: A Fintech’s Mission

Student loan debt remains a pressing issue for millions of Americans, and a Rochester-based fintech aims to offer relief through its cloud-based platform. This innovative solution is designed to simplify loan management and provide borrowers with actionable insights to reduce their debt burden.

The platform’s features include repayment optimization tools, personalized financial education, and seamless integration with loan servicers. By addressing the complexities of student loan management, this fintech is empowering borrowers to make informed decisions and achieve financial stability.

As the student loan crisis continues to evolve, solutions like this highlight the critical role fintech can play in addressing systemic financial challenges while fostering financial literacy and inclusion.

Source: RBJ

Industry Implications and Takeaways

Today’s updates underscore several key themes shaping the fintech landscape:

  1. Regulatory Milestones: ZBD’s MiCA license approval exemplifies the importance of regulatory compliance in unlocking growth opportunities.
  2. Strategic Partnerships: The collaboration between fintechs and credit unions demonstrates the value of combining technological innovation with traditional financial models to drive customer-centric solutions.
  3. Market Opportunities: Chime’s IPO move reflects a potential revival in fintech public offerings, signaling confidence in the sector’s long-term prospects.
  4. Social Impact: Fintech’s ability to tackle systemic issues, such as student loan debt, showcases its role as a force for positive change.

 

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SPAYZ.io prepares for iFX EXPO Dubai 2025

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Leading global payments platform SPAYZ.io has confirmed it will be attending iFX EXPO Dubai 2025 on 14 to 16 January. Exhibiting at Stand 64 at Trade Centre Dubai, SPAYZ.io’s team of professionals will be on hand providing live demonstrations of its renowned payment services for payment providers. Attendees will also receive exclusive insight into SPAYZ.io’s plans for 2025 alongside early early access to its upcoming plans for the new year.

SPAYZ.io delivers a host of payment solutions that leverage the latest technological innovations and open access to the fastest growing emerging markets across Africa, Europe and Asia. Over the past year, there has been huge demand for its Open Banking and local payment method services, alongside bank transfers, mass payouts, online banking and e-wallets.

Yana Thakurta, Head of Business Development at SPAYZ.io commented: “We look forward to once again participating at iFX Dubai to expand our network of partners and clients. It’s a fantastic way to kick off the year, connecting with thousands of industry leaders from FOREX platforms to trading companies, and everything in between.

“Our key goal for iFX Dubai EXPO 2025 is to expand our portfolio of solutions and geographies. We’re using this as an opportunity to partner with like-minded entities who share our ambition to provide payment solutions that are truly global.”

Come meet SPAYZ.io’s team at the Trade Centre Dubai at Stand 64. You can also book a meeting slot with a member of a team.

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Airtm Enhances Its Board of Directors with Two Strategic Appointments

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Airtm, the most connected digital dollar account in the world, is proud to announce the addition of two distinguished industry leaders to its Board of Directors: Rafael de la Vega, Global SVP of Partnerships at Auctane, and Shivani Siroya, CEO & Founder of Tala. These appointments reflect Airtm’s commitment to innovation and financial inclusion as the company enters its next phase of growth.

“We are thrilled to welcome Rafael and Shivani to Airtm’s Board of Directors,” said Ruben Galindo Steckel, Co-founder and CEO of Airtm. “Their unique perspectives and proven track records will be invaluable as we continue scaling our platform to empower individuals and businesses in emerging markets. Together, we’ll push the boundaries of financial inclusion and innovation to create a more connected and equitable global economy. Rafael and Shivani bring a wealth of experience and strategic insight that will strengthen Airtm’s mission to connect emerging economies with the global market.”

Rafael de la Vega, a seasoned leader in fintech global partnerships and technology innovation, is currently the Global SVP of Partnerships at Auctane. With a proven track record of delivering scalable, impactful solutions at the intersection of fintech, innovation, and commerce, Rafael’s expertise will be pivotal as Airtm continues to grow. “Airtm has built a platform that breaks down barriers and opens up opportunities for people in emerging economies to connect to global markets. I am excited to contribute to its growth and help further its mission of fostering financial inclusion on a global scale,” said Rafael.

Shivani Siroya, CEO and Founder of Tala, is a pioneer in financial technology, renowned for empowering underserved communities through access to credit and essential financial tools. Her leadership in leveraging data-driven innovation aligns seamlessly with Airtm’s vision of creating more equitable financial opportunities. “Empowering underserved communities has always been at the core of my work, and Airtm’s mission resonates deeply with me. I’m thrilled to join the Board and work alongside such a dynamic team to expand access to financial tools that truly make a difference in people’s lives,” said Shivani.

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