Why it matters

The Securities and Exchange Commission (SEC) provided a reminder to employers that whistleblowers can be non-employee third parties with the announcement of a $700,000 award to a "company outsider." The anonymous third party "conducted a detailed analysis that led to a successful SEC enforcement action" against an unnamed company, the agency explained, noting that the submission of "high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders." Chief of the SEC's Office of the Whistleblower Sean X. McKessy said the award "demonstrates the Commission's commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge," adding that the agency welcomes "analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation." Since 2011, the whistleblower program has only continued to grow, with more than $55 million paid to 23 whistleblowers.

Detailed discussion

Since the SEC established a new program for corporate whistleblowers at the direction of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the program has grown exponentially. The SEC's Office of the Whistleblower (OWB) began its efforts in August 2011, and each year since the agency has seen the number of reports—and the related awards—increase.

In fiscal year 2015, for example, whistleblower tips came in from all 50 states and 61 different foreign countries, with tips on a variety of alleged wrongdoing, from Foreign Corrupt Practices Act-related activity to insider trading to problems with corporate disclosures. Eight awards were doled out in FY 2015 totaling $34 million, including the first 30 percent recovery award and the first award in an anti-retaliation case. Whistleblower awards can range from 10 to 30 percent of the money collected when monetary sanctions exceed $1 million.

Providing the most recent example of the breadth of the program, the SEC announced a whistleblower award of more than $700,000 to a "company outsider" who "conducted a detailed analysis that led to a successful SEC enforcement action."

"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 a press release about 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 agency did not disclose any information that might directly or indirectly reveal the identity of the whistleblower.

McKessy added, "This award demonstrates the Commission's commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency. We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation."

To read the SEC order determining the whistleblower's claim, click here.