Risk & Compliance

SEC Issues Milestone Whistleblower Award

The $700,000 award is the first to a company outsider, illustrating the broad scope of the SEC's whistleblower program.
Matthew HellerJanuary 18, 2016

In a milestone for the U.S. Securities and Exchange Commission’s whistleblower award program, the agency on Friday announced a $700,000 award to an industry expert who provided it with “high-quality analysis” in an enforcement action.

The award is the first the SEC has issued to someone outside a company since it launched the whistleblower program in 2011. Whistleblowers who voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action are eligible for an award.

“The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders,” Andrew Ceresney, Director of the SEC’s Enforcement Division, said in announcing the award. “We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations.”

The SEC did not identify the outsider or the company involved in the case, saying only that the person “conducted a detailed analysis that led to a successful SEC enforcement action.”

Steven Pearlman, a partner at law firm Proskauer Rose, told the Wall Street Journal that the award is a “game-changer” that vividly demonstrates the extraordinarily expansive reach of the SEC’s whistleblower program.

“Before this award, companies principally had been focusing on tips from current and former employees,” he said. “Now companies will have a greater appreciation for the wider sources of original information on which the SEC may rely.”

Jordan Thomas, a partner at law firm Labaton Sucharow, said the award was likely to lead to more outsiders coming forward in the future, noting that one of the goals of the whistleblower program is }to get people who know things — particularly sophisticated industry players — to speak up.”

“We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation,” said Sean X. McKessy, chief of the SEC’s Office of the Whistleblower.

The program has so far paid more than $55 million to 23 whistleblowers.