Monday, the Securities and Exchange Commission announced “a whistleblower award payout between $475,000 and $575,000 to a former company officer who reported original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.”  This was the SEC’s first award to a former officer because officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program.  17 C.F.R. § 240.21F-4(b)(4)(iii)(A). There is an exception if the whistleblower waits at least 120 days after providing the information to the company’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or her supervisor.  17 C.F.R. § 240.21F-4(a)(4)(v)(C).  

The SEC’s order is redacted and the company is not identified.  If the officer had been employed in California, one wonders whether the corporation would be entitled to recover the award from officer pursuant to Section 2860 of the California Labor Code:

Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.

The question, therefore, is does “everything” mean everything, including rewards for disclosing company information to the government?