The SEC awarded almost $2.5 million to a whistleblower from a domestic government agency for reporting the "improper conduct" of a company. In the Order determining the award claim, the SEC stated that a government employee may be eligible to receive a whistleblower award provided the employee is not employed by (i) an appropriate regulatory agency (as defined by Exchange Act Section 3(a)(34)) or (ii) a law enforcement agency.
Commentary / Jodi Avergun
The SEC's decision to pay a whistleblower fee to a government employee whose agency likely did business with the company against which the SEC brought charges seems a somewhat odd use of the whistleblower program. Unless the whistleblower was also reporting on some fraud or misconduct within the whistleblower's own agency in paying, or perhaps colluding with, a public company vendor providing services to the government, it does not seem that reporting on an entity for which the whistleblower does not work is the kind of protected activity that the whistleblower reward program was designed to encourage. While it is not clear from the SEC's materials how this case developed, shouldn't a government employee be expected to do the right thing, even without some further financial incentive? Should we be concerned that government employees, with their superior access to information, may become incentivized to seek information about private entities inappropriately for the purpose of collecting rewards? We hope there is more to this story than there seems to be.
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