A $4.5 million whistleblower payout issued last week by the Securities and Exchange Commission marked an important — and perhaps fleeting — milestone for the agency, the Wall Street Journal reported. The award was the first granted to a claimant under a provision of whistleblower rules designed to incentivize internal reporting by tipsters who also report to the SEC within 120 days. But a recent U.S. Supreme Court decision that raised questions about protections for whistleblowers weakens the regulator’s policy, according to lawyers who fear tipsters may now be more reluctant to report information to company compliance officers. If a tipster chooses to report alleged wrongdoing to the SEC within 120 days of reporting it to a company, the policy says, the tipster’s case for an award will benefit from information the company uncovers in internal probes resulting from the tip. That is assuming the company provides the information to the SEC. The provision says that reporting to the company isn’t required, but it encourages internal reporting first in an effort to allow a company to police itself and reduce the burden on government investigators, according to the SEC discussion of the rule before its implementation in 2011. Whistleblowers are entitled to between 10 and 30 percent of monetary penalties when their tips result in a successful enforcement action and when the monetary penalties are more than $1 million. A tipster’s participation with company compliance professionals is one factor in how much a tipster might be rewarded, the policy says.
