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SEC Awards Company Outsider Whistleblower for Detailed Analysis

The SEC recently announced that it had awarded $700,000 to a whistleblower “who conducted a detailed analysis that led to a successful SEC enforcement action.” While the SEC has paid over $55 million to 23 whistleblowers since 2011, the most recent award represents the first to a company outsider. Andrew Ceresney, Director of the SEC’s Enforcement Division said that “[t]he voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders.”

Steven Pearlman, a partner at Proskauer Rose, suggested that the award “could create a huge number of tips that could swamp the SEC . . . because anybody who sees market trends that may look curious or unusual to them could come up with a theory that it may be attributable to fraud.” However, Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, encouraged outside tips: “This award demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.  We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.”