On Monday, September 22, the Securities and Exchange Commission (“SEC”) announced that it expects to  award a record-breaking $30 million to a foreign whistleblower. The award will be the largest in the history of the SEC Whistleblower Program, more than doubling the previous high of $14 million.  It also is  the fourth award to be issued to a whistleblower living in a foreign country.

The whistleblower in the case was a foreign national who came forward with information about an ongoing  fraud that would have been very difficult for the SEC to detect otherwise.  Although the sheer value of the  award is unprecedented for the SEC Whistleblower Program, the award is actually below the average  percentage amount awarded to other whistleblowers.  According to the SEC Order, the whistleblower  unreasonably delayed in reporting the wrongdoing, warranting a downward adjustment of the award.

There can be no mistake that the SEC hopes the magnitude of its most recent award will incentivize future  whistleblowers to come forward.  As Andrew Ceresney, Director of the SEC’s Division of Enforcement,  explained, “This record-breaking award sends a strong message about our commitment to whistleblowers  and the value they bring to law enforcement.”  Additionally, the SEC believes this award will cement the  international reputation of its Whistleblower Program.  According to Sean McKessy, Chief of the SEC’s  Office of the Whistleblower, the award “shows the international breadth of our whistleblower program as  we effectively utilize valuable tips from anyone, anywhere to bring wrongdoers to justice.  Whistleblowers  from all over the world should feel similarly incentivized to come forward with credible information about  potential violations of the U.S. securities laws.”

Although the SEC Whistleblower Program is only three years old, it has experienced consistent yearly  growth since its inception in 2012.  The SEC issued only one whistleblower award in fiscal year 2012, compared with four in fiscal year 2013 and nine thus far in fiscal year 2014.  The international reach of  the Program has also grown.  In its last annual report, the SEC stated that 11 percent of its tips had come  from overseas whistleblowers, and that number is expected to increase.

With respect to foreign whistleblowers, the SEC takes the position that “there is a sufficient U.S.  territorial nexus whenever a [whistleblower’s] information leads to the successful enforcement of a   covered action brought in the United States, concerning violations of the U.S. securities laws.”  According  to the SEC, “it makes no difference whether, for example, the [whistleblower] was a foreign national, the  [whistleblower] resides overseas, the information was submitted from overseas, or the misconduct  comprising the U.S. securities law violation occurred entirely overseas.”  In fact, the SEC Whistleblower  Program offers anonymity and the potential for large awards for the whistleblower, benefits that many  foreign securities and financial regulators do not yet offer.

The increasingly large awards provided under the SEC Whistleblower Program have attracted the attention  of law firms specializing in False Claims Act “qui tam” lawsuits.  Under the False Claims Act, a relator  reporting false claims against the U.S. government is entitled to receive between 15 and 25 percent of the  amount recovered by the government through the qui tam action, and in fiscal year 2013 alone, the  government recovered $2.9 billion from qui tam cases, with whistleblowers recovering $345 million.

Given the growth of the SEC Whistleblower Program, both in terms of award value and geographic reach,  it has become increasingly important for companies to ensure that they have vigorous compliance  programs in place to prevent and detect potential securities violations, and to mitigate penalties that may  result from inadvertent violations.  Additionally, this award comes on the heels of the SEC’s first  whistleblower award to a compliance professional, further emphasizing the need for companies to ensure  that they have effective internal reporting and response procedures in place to promptly address any  reports of suspected wrongdoing.