The Securities and Exchange Commission has denied another whistleblower's claim for a cash reward under a bounty program established by the Dodd-Frank Act. This time, the tip came from a CEO who offered up allegations of accounting fraud at their own company.

In April 2006, the claimant submitted information to the SEC about the suspected fraud (the name of the whistleblower and firm were both redacted). Subsequent to that initial information, the executive did not provide any additional information.

The SEC did eventually file an enforcement action against the company, alleging that it violated various anti-fraud provisions of the federal securities laws, as well as registration and record-keeping requirements. Although the SEC omitted nearly all specific details regarding the matter, it did reveal that a district court judge ordered the company to pay civil penalties.

The SEC's preliminary determination concluded, however, that the claimant's tip was not “original information” because it was not submitted or updated after July 21, 2010, the date that Section 21F, which provided for whistleblower bounties, was added to the Exchange Act by the Dodd-Frank Act. Because of that implementation date, the original information, no matter how actionable it may have been, failed to qualify for a cash reward.

The claimant's objection led to a review by the SEC and, subsequently, a final denial issued on July 2.

Congress authorized the whistleblower program to reward individuals who offer “high-quality, original information” that leads to an enforcement action and sanctions of more than $1 million. Awards can range from 10 percent to 30 percent of the money collected, divided among validated tipsters.  The first award, in the amount of $50,000, was approved in August 2012.

Last month, the Securities and Exchange Commission rewarded three whistleblowers for their assistance in bringing an enforcement action against a “sham hedge fund.” That case marked the second time the Commission has awarded a whistleblower bounty since the passage of the Dodd-Frank Act.

An SEC order issued on June 12, allotted each of three whistleblowers a 5 percent take from forthcoming fines that will be collected in relation to its enforcement action against Locust Offshore Management and CEO Andrey C. Hicks. Hicks and his firm are accused of having defrauded investors of $2.7 million. In March 2012, the U.S. District Court for the District of Massachusetts entered default judgments against Locust and Hicks and ordered them to pay approximately $7.5 million in disgorgement and penalties.

A fourth application for that award was denied (the first such rejection) because the information “did not lead to, or significantly contribute to” an enforcement action, the SEC decided.