On August 21, 2012, the Securities and Exchange Commission announced the first award under its one-year old whistleblower program, through which tipsters can receive monetary awards for providing the SEC with assistance and information concerning possible securities fraud. The SEC revealed that an anonymous whistleblower will receive approximately $50,000 for providing the SEC with information used to stop a multimillion-dollar fraud. The SEC’s first award was anxiously anticipated because of expectations that it would reveal insights, both to future whistleblowers and the companies who may be subject of a report, about the SEC’s controversial program. But, to protect the identity of the whistleblower, the SEC issued a bare-bones announcement on its first award that provided little information about the whistleblower, the fraud, or bigger questions about what can be expected from the program going forward.

The SEC created its whistleblower program as required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the SEC’s program, it can pay awards to individuals who provide information about possible securities fraud if that information leads to an SEC judicial or administrative action resulting in monetary sanctions exceeding $1,000,000; the information is provided voluntarily; and the information is original, meaning derived from the independent knowledge or analysis of the whistleblower and not already known to the SEC. Awards can range between 10 and 30 percent of the amount collected, with the SEC having discretion on the amount. Sean McKessy, who heads the SEC’s whistleblower program, reports that the SEC is receiving an average of eight tips a day of potential securities fraud. The SEC is required to maintain the confidentiality of the whistleblower to encourage tips and protect against retaliation.

In announcing the first award, the SEC gave few details and did not reveal the company involved, the type of fraud that was involved, or the type of information revealed or assistance provided by the whistleblower. Instead, the SEC only stated that the whistleblower’s assistance helped uncover "the full dimensions" of an unspecified scheme. The SEC's announcement did show that the whistleblower was awarded the maximum amount authorized under the statute – 30 percent of the amount collected, which at the time of the announcement was $150,000, and that the whistleblower may receive additional payment if there is additional collection of the more than $1 million court-ordered sanctions. Notably, a second claimant was denied an award, but there is no discussion of why one tipster received an award while the other did not.

Many observers expected that the SEC would use the first award under the whistleblower program to set forth a paradigm for who is an ideal whistleblower and what information and assistance is expected from tipsters to receive an award. If that was the SEC’s original intent, it seems likely that an inadvertent disclosure this April of the identity of a whistleblower during an investigation led to the SEC’s decision to provide such limited information in this announcement. Whatever the reason, it appears that for the foreseeable future the SEC will be taking strong measures to protect the confidentiality of whistleblowers—perhaps much stronger measures than those required by Dodd-Frank—which will limit disclosure of the SEC’s decision-making process on whistleblower awards.