A recent Wall Street Journal article (subscription required) quoted Michele Wein Layne, Regional Director of the LA office of the SEC, when she addressed the SEC’s Office of the Whistleblower Bounty Program at the American Bar Association’s annual conference.  Ms. Layne responded to why federal securities regulators have made just two whistleblower awards since 2011: 

“[Whistleblower awards] take a long time.  It could be further out until you see some of those substantial awards.”  The Wall Street Journal article highlighted Ms. Layne’s description of the lengthy, multi-step process to a whistleblower award, and the following should be taken into account when pondering why we haven’t seen an avalanche of awards:

  • The SEC engages in a time-intensive investigation process to explore the whistleblower’s tip.  For example, a tip on alleged market manipulations or investment fraud requires a specialized investigation into complex subject matter. 
  • The SEC, when warranted at the conclusion of the investigation, takes legal action, which can take a lengthy period of time to get resolved. 
  • The whistleblower tip must yield over $1,000,000 in sanctions
  • The SEC must determine that the detailed prerequisites to receiving a whistleblower bounty are met, such as that the tipster provided “original” information. 
  • The SEC needs to determine the percentage—between 10% and 30%—of the recovery to which the whistleblower is entitled.

The Wall Street Journal article highlights that the complexity of these investigations has resulted in a long, meandering road to a pay day, and the SEC may pay out bounties a fairly long time after receiving a tip.  So it would be unreasonable to conclude that the issuance of only a few whistleblower awards thus far means that there won’t be a significant number of awards issued in the future.  Stay tuned …

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.