In determining whether to report internally prior to reporting to the SEC, a whistleblower should consult with an experienced SEC whistleblower attorney to determine the optimal path forward that will maximize a whistleblower award while also guarding against retaliation.

To qualify for an award, most whistleblowers are not required to report internally before reporting to the SEC. (See eligibility requirements for details.) However, the SEC whistleblower rules offer three significant incentives for whistleblowers to report internally:

1. If a whistleblower reports internally, and then to the SEC within 120 days of the internal disclosure, then the SEC will use the date of the internal report in determining whether the whistleblower provided “original information.” This internal reporting essentially “holds your place in line.”
2. If a whistleblower’s internal disclosure prompts a company investigation, the whistleblower will benefit from all the information discovered in that investigation.
3. The SEC may increase the size of a whistleblower’s award if the whistleblower participated in the company’s internal compliance systems.

Note that the whistleblower protection provision of the Dodd-Frank Act protects only whistleblowers that have provided information to the SEC about potential securities law violations. Therefore, a disclosure that is made solely to a corporate compliance program (without also providing the information to the SEC) would not be protected under the...

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