May lawyers ethically collect whistleblower bounties from the government in exchange for revealing confidential client information to the Securities and Exchange Commission? Regulations promulgated by the SEC under the authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 permit the payment of bounties to whistleblowers who report corporate wrongdoing to the government. Both NYCLA Ethics Opinion 746 and the Second Circuit’s decision in Fair Laboratories warn that the disclosure of client confidential information in exchange for a government bounty raises significant ethical issues for lawyers. Given the permissive nature of the SEC’s whistleblower bounty program, it is unlikely that a court would conclude that accepting a monetary benefit from the government is reasonably necessary.
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