On July 25, 2017, the SEC announced another whistleblower award – this one for almost $2.5 million. What sets this award apart from earlier awards is its recipient – “an employee of a domestic government agency.” The Order spends more words in its footnote explaining why a government employee is entitled to a whistleblower award than the Order does in discussing the substantive award itself.

Although it may be counter-intuitive for a government employee to be a “whistleblower,” the Order explains: “Generally speaking, an employee of a federal, state, or local government agency can – subject to the two statutory exceptions discussed below – be eligible for an award under our whistleblower program.” The first exception applies to employees of an “appropriate regulatory agency,” which is defined as the SEC and various banking agencies such as the FDIC, the Board of Governors of the Federal Reserve System and the Comptroller of the Currency. That makes sense. These are regulatory agencies that are responsible for enforcing the rules and regulations governing public companies and financial institutions, and the employees of those agencies should not be rewarded simply for doing their jobs.

The second exception applies employees of “a law enforcement organization.” Although the first exception defined “appropriate regulatory agency,” no definition exists in the statute for a law enforcement organization. Citing a separate section of the Exchange Act, the Order states that the term “law enforcement organization” “is generally understood as having to do with the detection, investigation, or prosecution of potential violations of law.” That involves some interpretation. Even though the whistleblower here worked for an agency that had some components with law enforcement responsibilities, the SEC found that it could in this case distinguish the component with law enforcement responsibilities from the component of the broader agency that employed this particular whistleblower.

This award shows that it is not only your company’s employees who may take internal issues to the SEC. Instead, outside contractors and even government employees may go to the SEC. This award suggests that the SEC will continue to publicize large monetary awards to encourage whistleblowers to provide evidence of larger-scale issues.

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