The SEC is giving a $1 million award to a couple who provided the watchdog agency with "key information" about alleged insider trading by hedge fund Pequot Capital Management. This is the largest award paid by the SEC for information provided in connection with an insider-trading case.

The case had stalled until Glen Kaiser and Karen Kaiser of Southbury, Conn., came forward with emails implying that the hedge fund used insider information in its trading of Microsoft (MSFT) stock. The information resulted in an insider-trading case that was eventually settled by Pequot and its CEO Arthur Samberg for $17 million.

Karen Kaiser is the ex-wife of David Zilkha, a Microsoft employee who accepted a job at Pequot. She and her husband, Gary, found a crucial email communication between Zilkha and a Microsoft employee that was not turned over to the SEC that connected the dots in the insider-trading case.

On the same day the SEC filed the settled complaint against Pequot and Samberg, with neither admitting wrongdoing, it also issued an order instituting administrative and cease-and-desist proceedings against Zilkha. That matter is pending before an SEC administrative law judge.

The SEC approved the award to the Kaisers based on a rule that allows the agency to give money to sources in insider- trading cases, up to 10% of the penalties. That provision has since been repealed by the Wall Street Reform and Consumer Protection Act, which now authorizes the agency to award bounties to parties who provide information leading to recovery of monetary sanctions in a broader range of cases, not just to civil penalties recovered in insider trading cases.

"Individuals who come forward with well-documented evidence of fraud greatly enhance the SEC's ability to swiftly build strong enforcement cases and hold wrongdoers accountable," says SEC spokesman Kevin Callahan. "We look forward to implementing the new provision in the Dodd-Frank Act that expands the SEC's authority to award whistleblowers in cases other than insider trading."

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