The Securities and Exchange Commission (SEC) announced May 17, 2016, that it will award between $5-6 million to a former company insider who provided detailed information to the SEC, paving the way for the agency to “uncover” the company’s securities violations. This is reported to be the third largest award rendered by the SEC Office of the Whistleblower following awards of $30 million and $14 million in September 2014 and October 2013, respectively.
Established in 2011 pursuant to the Dodd-Frank Act, the SEC Office of the Whistleblower has now awarded more than $67 million to 29 whistleblowers. Sean McKessy, Chief of the SEC’s Office of the Whistleblower, used the opportunity to reiterate that the SEC “anticipate[s] the continued issuance of significant whistleblower awards in the months and years to come.”
The magnitude of this highly publicized award is likely to encourage more whistleblower complaints. Publicly traded companies should ensure that their internal compliance and employee reporting programs satisfy “best practice” standards, step up efforts to encourage internal reporting of complaints, and consult with outside counsel if such complaints implicate “material violations” as defined by the SEC.