The U.S. Securities and Exchange Commission (SEC) operates an enormously successful whistleblower award program. In just ten years, it has paid out over $1.3 billion to individuals who have helped the SEC prosecute hundreds of securities laws violations. Most award recipients are regular employees, but a small portion have been legal or compliance personnel. Compliance and audit personnel occupy a unique role in a company as they are responsible for ensuring that laws aren’t violated, or if there is a violation, that the company remediates appropriately by reporting to the appropriate authorities.
When it comes to attorneys working in a compliance or audit roles, it is very difficult to qualify for a whistleblower award. For non-attorneys in compliance or audit roles the rules are more relaxed, but there are still a number of restrictions that have to be carefully navigated to become eligible for a whistleblower award. The upshot is that prospective whistleblowers in compliance or audit roles should proceed with caution and make sure they get legal advice before taking any steps towards reporting.
The Rules for Outside Counsel
Outside counsel are only eligible for SEC whistleblower awards in extremely limited circumstances. The SEC doesn’t have a blanket prohibition on outside counsel collecting whistleblower awards, however, the rules of the whistleblower program make it very difficult as a practical matter for outside counsel to become eligible for awards.
When it comes...
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