The SEC just announced a $325,000 award given to a former investment firm employee who blew the whistle to the SEC with specific information that allowed the federal agency to begin an investigation that later uncovered extensive fraudulent activity at the tipster's ex-employer.
Run! Don't Walk ... to the SEC
The anonymous tipsters in the case opted to wait until he left the firm before he handed detailed information to the federal Securities Exchange Commission. Although $325,000 is a nice validation for the whistleblower's actions, the SEC announced that the award would have been higher if the tipster had "not hesitated" in bringing his information.
This notion that you should't hesitate as a whistle blower has seen court precedent before. Late last year, the SEC announced an award of $30 million for another anonymous tipster whose material information led to a successful enforcement action -- making that the biggest ever in the history. Even that dwarfed the previous award of $14 million. The SEC made it clear that it would actively encourage tipsters to inform the federal watchdog agency by capping awards as a disincentive for waiting.
Going to the feds is a little easier said than done. There is, as most know, a strong culture of silence with regards to corporate goings-on. And even with anonymity, rumors can spread, causing tipsters to get black-listed for the rest of their careers. Even whistleblower protection laws may offer little comfort.
Good Time for Whistleblowers
The SEC's whistleblower program has been quite successful since its beginnings in 2011. In total, over $54 million has been awarded to whistleblowers who've provided material information that allowed the SEC to ferret out corporate securities shenanigans.
In-house lawyers should be prepared to get panicked calls from the executives of their companies -- if they haven't already. But always remember the cardinal rule: general counsel and in-house lawyers owe their allegiance to the company -- not to individuals.
No doubt the SEC is doing all that it can to further encourage tipsters to come forward with greater guarantees on anonymity. Since silence had been the cultural norm for so many years, the effects of mass snitching will surely change the internal structure of corporate dealings for years to come.