The SEC announced in January that it had awarded more than $700,000 to a “company outsider,” who provided the SEC with a detailed analysis that resulted in a successful SEC enforcement action. In its press release announcing the award, the SEC’s Director of the Division of Enforcement Andrew Ceresney said: “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.” Sean McKessy, the chief of the SEC’s Office of the Whistleblower added: “We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.” While the Dodd-Frank framework clearly contemplates whistleblower awards to company outsiders, this award was the first of its kind.

Several weeks after the SEC’s announcement, Eric Scott Hunsader came forward in media interviews and revealed himself to be the whistleblower who had received the award. Hunsader, who owns a market data firm, said that he discovered that traders, using one of the New York Stock Exchange’s proprietary data feeds, received a head start over those that used the consolidated feed. Believing that this was against SEC regulations, Hunsader said he submitted his findings to the SEC and had a meeting shortly thereafter with the SEC enforcement staff.

While the award to Hunsader was the first of its kind, it is unlikely to be the last. It no doubt causes further concern for executives who are already worried about their employees raising issues to the SEC rather than registering complaints internally. The possibility that outside analysts and industry experts may be looking for securities violations in order to reap whistleblower awards only reinforces that companies should be on the lookout for wrongdoing and seek to remedy it before others identify it.