On March 19, 2018, the Securities and Exchange Commission (“SEC”) announced its highest ever Dodd-Frank Act (“DFA”) bounty awards to three whistleblowers. These SEC awards represent a new milestone in the SEC’s ongoing efforts to incentivize would-be whistleblowers to report unlawful conduct directly to the Commission. Two whistleblowers will divide a nearly $50 million award and a third whistleblower received $33 million; both awards shattered the previous high award of $30 million and continue the SEC’s trend of issued rising awards.

In a press release, Jane Norberg, Chief of the SEC’s Office of the Whistleblower, said these awards demonstrate that whistleblowers can provide the SEC with information that allows the agency to pursue and remedy violations that may otherwise go unnoticed. While these awards demonstrate the role whistleblowers play in assisting the SEC, multi-million dollar awards are likely to incentivize others with high quality information to file reports with the agency.

Since issuing its first award in 2012, the Commission has awarded more than $262 million to whistleblowers who have aided in their investigations. These awards are paid by an investor protection fund that Congress created in connection with passage of the Dodd-Frank Act. The fund is financed entirely through monetary sanctions paid by securities violators to the SEC. Notably, despite the sizeable awards, this DFA whistleblower fund does not have any impact to or reduce the funds collected for the benefit of harmed investors.

While the sheer size of these awards may be enough to entice potential whistleblowers, the Supreme Court’s recent decision in Digital Reality Trust, Inc. v. Somers also provides further incentive for whistleblowers to report suspected unlawful conduct directly to the SEC, and to bypass a company’s internal reporting mechanisms (i.e. hotline). In Digital Reality, the Supreme Court held the Dodd-Frank’s anti-retaliation provision only protects from retaliation those employees who first provide information of a violation of the securities laws to the SEC. In other words, employees who merely make an internal report through a company’s reporting processes will, without notifying the SEC, cannot avail themselves of the DFA anti-retaliation protections. Hence, the Digital Realty Trust decision, together with the record-setting SEC awards, will likely prompt whistleblowers of all types – those with actual concerns of wrongdoing as well as opportunistic whistleblowers, to make their reports directly to the SEC.

Now, more than ever, employers need to pay attention to their internal corporate governance programs to ensure they are effective in re-enforcing the Company’s commitment to operating ethically and according to applicable laws, make it easy for employees to know where to go if they observe unlawful activity, and promote trust in the Company’s response to issues raised.

* Darran St. Ange, Summer Law Clerk, assisted in the preparation of this post.