You probably saw that on Monday the SEC announced its largest-ever award under the Dodd-Frank whistleblower provisions: over $30 million to an unnamed tipster from overseas. As with all of the awards issued so far, the Commission is maintaining the whistleblower’s confidentiality and saying very little about the case the tip generated. The big payday has gotten a lot of coverage, and SEC whistleblower chief Sean McKessy deserves a lot of credit for pushing the program to this point. I really only have two thoughts about this award.
First, and this isn’t especially profound, but $30 million is a lot of money. I wonder if it’s near the upper limits of what general observers will accept as appropriate. I suppose what I’m asking is, at what point do these awards start to look less like sensible compensation for information exposing federal securities violations and more like insane windfalls that are completely divorced from the benefits they’re generating? What if the 2010 Goldman Sachs case, with sanctions of $550 million, had been ignited by a whistleblower and the SEC decided to award that person 20% of it, in the middle of the range? Would the whistleblower program have more or less credibility after paying out $110 million for that case? Maybe some people think we’ve already gotten to Insane Clown Posse stage, but I haven’t seen a lot of commentary to that effect yet. (Update: Broc Romanek thinks we’ve reached that point.)
Second, in a long footnote to the order granting the award, the SEC took the opportunity to grapple with the extraterritorial aspects of granting this award. In doing so, it acknowledged the Second Circuit’s recent Liu v. Siemens AG opinion, in which the court held that Dodd-Frank’s anti-retaliation provisions do not apply to foreign whistleblowers. In the Commission’s view:
"[T]here is a sufficient U.S. territorial nexus whenever a claimant’s information leads to the successful enforcement of a covered action brought in the United States, concerning violations of the U.S. securities laws, by the Commission, the U.S. regulatory agency with enforcement authority for such violations. When these key territorial connections exist, it makes no difference whether, for example, the claimant was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the U.S. securities law violation occurred entirely overseas. [As for Liu], we do not find that decision controlling here; the whistleblower award provisions have a different Congressional focus than the anti-retaliation provisions, which are generally focused on preventing retaliatory employment actions and protecting the employment relationship.
So the SEC is pressing on. If I were in its position I think I’d say the same thing because it may be a while before we get a challenge to a foreign whistleblower’s award.
