Multimillion-dollar Payouts for Reporting Securities Fraud. The Securities and Exchange Commission (SEC) has approved new rules for securities fraud whistleblowers. According to a report in The Los Angeles Times, under the new rules, whistleblowers could be awarded multimillion-dollar payouts for reporting securities fraud.
The new whistleblower provisions were part of the Dodd-Frank Wall Street reform law. Under the law, the SEC may award between 10 and 30 percent of any monetary sanctions that exceed $1 million to whistleblowers providing information leading to a successful enforcement. The SEC was also granted expanded power to reward whistleblowers for reportinga variety of financial crimes. Previously, the agency could only do so in cases that involved insider trading.
The SEC approved the final rules by a vote of 3-2.
The SEC approved the final rules by a vote of 3-2, the Times said. Both Republican members of the Commission voted against the rules.
The financial industry is not exactly thrilled about the development. Some companies are unhappy that the final rules don’t require whistleblowers to report problems internally first or at the same time that they inform the SEC, according to the Times. They’ve complained this will undermine their own internal reporting programs.
“Today’s rules are intended to the break the silence of those who see a wrong,” said SEC Chairman Mary Schapiro. According to the Times, Shapiro said the rules approved by the commission “struck the correct balance between encouraging whistleblowers to report problems internally when appropriate and providing the option of heading directly to the SEC.”
To try to appease the industry, the final SEC rules do allow whistleblowers to preserve their reward eligibility if they report to a company, and then to the SEC.
Still, even with that concession, the U.S. Chamber of Commerce still opposed the new rules, claiming in a statement that they put “trial lawyer profits ahead of effective compliance.”
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