When most employers hear the word “whistleblower,” they think of their current employees and various anti-retaliation laws; however, under the SEC’s “Whistleblower Program,” the “whistleblower” may be a current or former employee. Indeed, as reported recently by The Wall Street Journal, retirees make up the largest group of individuals providing information under the Whistleblower Program.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in 2010, the Securities and Exchange Commission was tasked with establishing a “Whistleblower Program” to encourage individuals to report possible violations of the federal securities laws to the SEC. If the information reported leads to successful SEC action resulting in monetary sanctions (which is defined as including penalties, disgorgement, and interest) of at least $1 million, the individual is entitled to an award of between 10% and 30% of the monetary sanctions collected by the SEC against the company. According to The Wall Street Journal, to date, the Whistleblower Program has paid approximately $15 million to whistleblowers.

Under the program, an “eligible whistleblower” is a person who voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur, and the person does not need to be employed by the company at issue. If the individual worked or works at a company that has an internal compliance and reporting process, and first reports the information internally, the individual is eligible for an award only if the individual reports the information to the SEC within 120 days of first reporting it internally.

What’s the moral of the story? First – to state the obvious – compliance is paramount. With the Whistleblower Program, employees, former employees and even industry observers and other outsiders are incentivized to help the SEC in its efforts to enforce securities laws. Second, it is important that all employers maintain comprehensive reporting and compliance systems that outline clearly the procedures to be followed in the case of suspected violations of securities laws and that encourage individuals to report the suspected violations or potential violations internally so that employers can address actual or potential violations early. Third, these policies should state clearly that employees may report violations or suspected violations both during and after employment. Finally, employers may consider including a copy of its compliance policy and internal reporting procedures with any paperwork given to employees upon separation.