United States: SEC Awards More Than $14 Million To Whistleblower

Last Updated: October 15 2013
Article by Richard E. Coe, Mary Hansen and Daniel E. Brewer

On October 1, 2013, the Securities and Exchange Commission (SEC) awarded more than $14 million to a whistleblower who provided information that led to an SEC enforcement action.1 The SEC did not disclose the name of the whistleblower, the subject of the tip, or the action that resulted from the tip. This is the SEC's third and by far the most significant payment to a whistleblower under the Dodd-Frank Act's bounty program. In August 2012, the SEC made its first payment of approximately $50,000 and this past month made payments of $25,000 to three whistleblowers who helped halt a sham hedge fund. This award is likely to raise the profile of the SEC's whistleblower program and lead to an increase in the number of tips submitted to the SEC.

The bounty program provides a monetary incentive ranging from 10%-30% of the sanctions collected to whistleblowers who voluntarily provide the SEC with original information that leads to a successful SEC action with sanctions exceeding $1 million. To administer and enforce the bounty program, the SEC created the Office of the Whistleblower in 2011. To learn more about the Dodd Frank Act's bounty program, click here.

Before this staggering award, companies were already concerned that employees would bypass internal compliance systems as a result of the bounty program. Through its implementing regulations, the SEC attempted to encourage internal reporting. If an employee makes an internal report and the company decides to disclose a potential securities law violation to the SEC, the employee will receive credit for any additional information uncovered by the company's investigation. Additionally, if a whistleblower reports to the SEC within 120 days of making an internal report, the tip will be deemed made to the SEC on the date of the internal report. The SEC also considers whether an internal report was made in determining the amount of a whistleblower award.

Some companies have been hesitant to inform employees of these internal reporting incentives because it would increase awareness of the whistleblower program and therefore have the unintended consequence of increasing the number of tips, whether they were first reported internally or not. Now that a $14 million award has been made, it is likely that employees will become more familiar with the bounty program whether or not they hear about it from their employer. Accordingly, companies may want to take care to evaluate their policies and procedures for handling internal reports of wrongdoing and make efforts to create an environment that encourages employees to bring any potential wrongdoing to management's attention.

Not only does the SEC protect the identity of whistleblowers, the investigative staff will not disclose during the course of an investigation that the investigation was prompted by a whistleblower complaint. This makes it difficult for companies to evaluate the effectiveness of employee education and internal reporting systems.

Companies should also be familiar with the Dodd-Frank Act's anti-retaliatory provisions. It provides employees a private right of action if they suffered an adverse employment action as a result of protected activity and entitles a successful litigant to reinstatement with the same seniority status, two times the amount of back pay otherwise owed to the individual with interest and litigation costs, expert witness fees and reasonable attorneys' fees. While the U.S. Court of Appeals for the Fifth Circuit recently interpreted these provisions to only afford protections to a whistleblower that made a report directly to the SEC,2 other courts and the SEC have interpreted these protections to apply more broadly to employees who make only an internal report.3 The Chief of the SEC's Office of the Whistleblower recently stated in an interview with the Wall Street Journal that the Office is "actively looking" for the appropriate case to pursue a retaliation claim and is specifically looking for a case in which an employee was retaliated against for making a report in good faith that turns out to be wrong.4

Drinker Biddle can help companies to determine whether they want to educate employees about the incentives for internal reporting and to formulate effective internal compliance strategies to deal with this potential new wave of whistleblowers.


[1] The SEC's Press Release is available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539854258.

[2] See Asadi v. G.E. Energy (USA), LLC, No. 12-20522 (5th Cir. July 17, 2013).

[3] See, e.g., 17 C.F.R. § 240.12F-12(b)(1); Kramer v. Trans-Lux Corp., No. 11-1424, 2012 U.S. Dist. LEXIS 136939, at *10 (D. Conn. Sept. 25, 2012); Egan v. TradingScreen, Inc., No. 10 Civ. 8202 (LBS), 2011 WL 1672066, at *4-5 (S.D.N.Y. May 4, 2011).

[4] Rachel Louise Ensign, Wall Street Journal, Sep. 24 2013, "Q&A: Sean McKessy, Chief, SEC's Office of the Whistleblower," available at http://blogs.wsj.com/riskandcompliance/2013/09/24/q-a-sean-mckessy-chief-of-the-secs-office-of-the-whistleblower/?KEYWORDS=mckessy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Mary Hansen
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.