The Securities and Exchange Commission's recent $30 million award to a foreign-based whistleblower has put financial firms on notice. 

At the inception of the whistleblower program in 2010, observers had two big questions: Would the SEC actually award whistleblowers as promised? And would the anonymity of whistleblowers be protected so that corporate insiders would feel comfortable coming forward? The SEC's only prior bounty provision, applicable to whistleblowers who reported insider trading violations, had produced limited awards, raising doubts about the program's efficacy.

The SEC has since demonstrated its commitment to meeting both of these objectives by recently awarding a whistleblower a $30 million bounty. Because the Dodd-Frank Act asserts that the award must be between 10% and 30% of the SEC's recovery, this necessarily means that the SEC action required the defendant to pay between $100 million and $300 million. Those are certainly sums that warrant notice and concern.

The fact that the award was made to a foreign whistleblower is also significant, since it further empowers employees of other multinational firms to come forward. This will provide the SEC with the opportunity to crack down on foreign violations under such laws as the Foreign Corrupt Practices Act, which prohibits payments to foreign officials in connection with government business or actions. Because damages in such cases are measured by the business generated as opposed to the amount of the payment to the official, it is easy to see how a potential penalty — as well as the award to the whistleblower — can rise quickly.

Given that enforcement actions against such violations are often accompanied by significant sanctions, the implications for companies with foreign operations cannot be overstated. Moreover, the award serves as a reminder that such companies must regularly review compliance policies and internal reporting mechanisms in their foreign operations, train managers to take such reports seriously, and never ignore or retaliate against employees that bring forward concerns about compliance issues and fraudulent practices.

Domestic banks and financial institutions should also take heed of the award. In conjunction with the Department of Justice's recent announcement that it will seek enhanced whistleblower awards in the financial services industry, the whistleblower award sends a strong signal that the government is closely watching this sector.

Financial firms should be diligent about internal compliance and controls and emphasize a culture of compliance and transparency so that they can learn of these issues internally before the government gets involved. Too often, an employee brings forward a problem only to find that their manager misunderstands or ignores it, leading the employee to the government to find an audience that will listen.

Now more than ever, the government is all ears. And it is clearly willing to award millions of dollars for information that helps it net recoveries. 

Christopher Robertson is co-chair of Seyfarth Shaw LLP's whistleblower team and partner in the firm's Boston office. His areas of focus include complex commercial and financial litigation, securities litigation, consumer fraud litigation, regulatory compliance, corporate governance and internal investigations.