For the first time the U.S. Securities and Exchange Commission has invoked the 120-day safe harbor rule to award a whistleblower who first reported the complaint to a different federal agency.

The SEC on Thursday said it awarded more than $2.2 million to the whistleblower, who also later gave the same information to SEC investigators. Under the safe harbor rule, if a whistleblower gives the SEC the same information within 120 days of reporting it to another agency, the commission will treat the information as received on the same date as the other agency.

Sean McKessy, who served as the first chief of the SEC Office of the Whistleblower and is now a whistleblower lawyer with Phillips & Cohen, told Corporate Counsel on Friday that the SEC action, while “heartwarming” to him, sends a mixed message to general counsel.

“This ruling would normally encourage internal reporting within a company first,” McKessy said, because the whistleblower would still have 120 days to report to the SEC if he or she wasn't satisfied with the company's response.

But, McKessy noted, the recent U.S. Supreme Court decision in Digital Realty Trust v. Somers held that internal reporting does not protect an employee from employer retaliation. So that ruling works against the employee waiting to tell the SEC, he said.

“The two rulings have painted in-house counsel into a very difficult spot,” McKessy said. “General counsel could use the SEC ruling to encourage employees to report internally first. But how do you do that with a straight face when you know how the Supreme Court ruled?”

McKessy also said the SEC ruling was somewhat unusual because the agency had already begun its investigation based on the other agency's shared information.

“A harder line reading would have been that the safe harbor rule was intended to be invoked before the SEC begins its investigation,” he said. “And some might still suggest that.”

Still, McKessy said the SEC ruling was a good decision and “squares with what the rules were intended to accomplish.”

The SEC explained in a statement that within the rule's time period the whistleblower gave the same information to the SEC and “provided substantial cooperation in the investigation.”

“Whistleblowers, especially nonlawyers, may not always know where to report, or may report to multiple agencies,” said Jane Norberg, chief of the SEC's Office of the Whistleblower, in the statement.

She continued, “This award shows that whistleblowers can still receive an award if they first report to another agency, as long as they also report their information to the SEC within the 120-day safe harbor period and their information otherwise meets the eligibility criteria for an award.”

Edward Ellis, co-chair of the whistleblower practice at Littler Mendelson, defends companies against complaints. He said the ruling was really “neutral” for corporations.

“It's a sensible interpretation of the [safe harbor] law,” Ellis said. “It doesn't matter to the company which agency gets the report first, it is still going to be investigated.”

The SEC withholds the identity of whistleblowers as well as any facts that might help identify the individual. In this instance, the commission did not release the name of the whistleblower, the company involved, or the other agency that first received the complaint.

The whistleblower award amounts to from 10 percent to 30 percent of the funds that the SEC collected from the company. So the company's civil penalty in this case would have been between $22 million and $66 million.

All payments to whistleblowers are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.