The SEC has proposed expanding whistleblower awards to include deferred and non-prosecution agreements with the Department of Justice or a state attorney general in a criminal case as well as SEC settlements outside of a judicial or administrative proceedings. According to the SEC, the proposal would “ensure that whistleblowers are not disadvantaged because of the particular form of action” taken. The SEC also proposed allowing discretionary awards in smaller cases that would not otherwise qualify. The SEC whistleblower program, established by the Dodd-Frank Act, has ordered over $266 Million in 55 whistleblowers, although 40% has been paid out to only 3 awards.
OUR TAKE: We would prefer to see the SEC limit the snitch program, rather than expand it. While the logic behind the program makes sense, the SEC should also examine its unintended consequences including the disincentives to include all necessary employees in problem resolution and the growth of extortionist lawyers representing disgruntled employees.