In a Law360 article (subscription required), Steve Pearlman, co-head of Proskauer’s Whistleblowing & Retaliation Group, commented on the “controversy” surrounding the requirement some employers impose upon employees to report misconduct internally.  Pearlman noted that “[t]he plaintiffs bar and defense attorneys are sharply divided over the issue, with the whistleblower office opposed to mandatory reporting.” 

Pearlman further recognized that “[o]n the one hand, [companies] believe managers have a duty to report wrongdoing, but also don’t want to run into trouble with the enforcement division.”  In particular, some employers rely on managers’ duty of loyalty and, in some cases, fiduciary duties.  Commenting about the need to think through this issue carefully before acting, Pearlman recognized that “[y]ou never want to get sideways with the SEC.”

Pearlman also stated that, despite the SEC only issuing one whistleblower award thus far, the agency’s “careful approach to employers may turn more aggressive as it looks to ‘take a stand.’”  “[The Dodd-Frank bounty program] is still a nascent program,” Pearlman cautioned, and “[i]f the SEC sees a violation, it’s well known for being vigilant.”