On September 30, 2013, the last day of the fiscal year, the SEC awarded more than $14 million to a tipster who provided details that led to a substantial recovery of investments in an enforcement action.  Though only the third SEC whistleblower award since the bounty program was started, our readers know this award confirms a long-held prediction that larger awards were just a matter of time. 

Latest Award Dwarfs Prior SEC Payouts

The SEC’s first whistleblower award in August 2012 was $50,000.  In August and September of 2013, the SEC gave awards in a sham hedge fund case that is expected to hover around $125,000.  This third award is much more substantial.  As SEC Chair Mary Jo White stated:  “Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips.  We hope an award like this encourages more individuals with information to come forward.”

Why Is The Payout So Big?

The September 30 Order noted that the whistleblower’s original information led to successful enforcement of the SEC whistleblower regulations.  It emphasized that the sizeable award to the anonymous tipster recognized (1) the significance of the information that the Claimant provided to the SEC; (2) the manner in which Claimant assisted the SEC in the action; and (3) the enforcement interest in deterring violations by granting awards.

Implications

It is quite likely that this award will lead to an influx of additional tips.  Will the SEC have sufficient resources to handle it?  Will the quality of tips rise or fall?  Will employers take heed and step-up their compliance programs and create incentives for internal reports?  Is this an anomaly or are awards of this magnitude around the corner?  Stay tuned.

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Photo of Steven J. Pearlman Steven J. Pearlman

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

Employment, Restrictive Covenant & Trade Secret, and Whistleblower…

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

Employment, Restrictive Covenant & Trade Secret, and Whistleblower Practice. Steven’s national practice focuses on defending companies in federal and state courts and in arbitration fora against the full spectrum of employment-related claims, including claims of executives; restrictive covenant violations; employee raiding; theft of trade secrets; whistleblower retaliation under the Sarbanes-Oxley Act, the Dodd-Frank Act and similar state laws; and wage-and-hour violations, including class, collective and PAGA actions.

Steven has successfully handled trials in multiple jurisdictions; prevailed in seeking and defending against applications for temporary restraining orders and preliminary injunctions; defended one of the largest Illinois-only class actions in the history of the federal courts in Illinois (over 90k putative class members); and prevailed following his oral arguments before federal and state appellate courts. He brings his litigation experience (beginning in 1998) to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has the unusual experience of testifying in federal court in connection with investigations. 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.

Thought Leadership and Accolades. Steven was named 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 has reported:

  • Steven is “one of the best in the country and has a lot of experience”;
  • Steven is as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field”;
  • He is thoughtful, attentive and demonstrates an acute understanding of matters top of mind for business-minded general counsel; and
  • “He is someone who can navigate the twists and turns of litigation without difficulty.”

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 U.S. Library of Congress Burton Award Winner for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often 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.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.

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