Does the Securities and Exchange Commission's (SEC) recent whistleblower award make your internal whistleblower hotline efforts futile? As of late, if feels like there are 14 million reasons why the answer is “yes.”

When Dodd-Frank was signed into law in July 2010, many thought that one of its most powerful features was the creation of a new whistleblower program. In addition to creating the Office of the Whistleblower, the rules also created a new bounty system intended to incentivize whistleblowers to approach the SEC with their suspicions. The dollars seemed potentially significant: a whistleblower can receive 10 to 30 percent of the penalty that the SEC imposes based on information the whistleblower provides to the SEC (provided, however, that the SEC or other government agency collects at least $1 million).

At first, nothing much happened. When the SEC released its first annual report on the Office of the Whistleblower's activities for 2012, it didn't have much to say. Sure, the Office received 3,001 tips; however, that was about one-tenth of the number the SEC had expected to receive. Moreover, these 3,001 tips in 2012 resulted in exactly one payment that year. This was the August 2012 SEC award of $50,000 to one anonymous person. Few details of the case were given in the SEC's press release, making the deterrent effect of this outcome more than a little questionable.