Tips are pouring in after a revision to the U.S. Securities and Exchange Commission (SEC) whistleblower program went into effect. Granted authority under the Dodd-Frank Wall Street Reform and Consumer Act to provide financial rewards to whistleblowers, the SEC has received multiple tips about fraud since the new rules were implemented.
“Eligible whistleblowers are entitled to an award equal to 10 to 30 percent of the money recovered when they voluntarily provide us with original information that leads to a monetary sanction greater than $1 million in a Commission enforcement action,” according to the SEC Whistleblower Provisions.
The rules had been effective under the new program for only seven weeks when 334 tips concerning fraud and other illegal activities were submitted. Information came from 37 U.S. states and 11 foreign countries, including China (10 tips), the United Kingdom (9 tips), Australia (3 tips), Spain (2 tips) and the Netherlands (2 tips).
The high value of the rewards is necessary due to the retaliation typically experienced by a whistleblower. A survey conducted by the Ethics Resource Center (ERC) found more than one-fifth of those surveyed who blew the whistle on employer misconduct reported retaliatory actions by other employees, management, and/or supervisors.
Will the promise of rewards lead to a reduction in fraud? Only the passage of time will demonstrate the effectiveness of this strategy.
Sarelson Law Firm – Miami litigation lawyers