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.

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.