In response to the 2010 Financial Crisis, the Securities and Exchange Commission launched its SEC Whistleblower program. The Whistle Blower program was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and was designed to offer protection as well as financial incentives to employees who brought securities and fraud violations to the SEC’s attention.
Prior to the SEC launching this program, many felt that there was a lack of people reporting to the SEC because they were frightened of retaliation from their employer including the risk or losing ones job or being blacklisted from an industry. In addition to providing protection to the employee by keeping his or her identity confidential, the SEC whistleblower program also provides financial incentives to the whistleblower. The whistle blower can be entitled to ten to thirty percent of the fines collected by the SEC as a result of information provided that leads to a successful investigation. Payouts to whistleblowers only begin after the firm has been fined over $1 million. The SEC recently released its largest award to date; seventeen million dollars went to the Whistleblower. These numbers might seem astonishing but it is important to keep in mind that this represents a small number of the amount the SEC collects. Furthermore, the numbers are reflective of the fact that without the help of the whistleblower the SEC would have lacked the evidence to sufficiently go after the company. The idea behind these extremely high payouts is to give the officers of the companies, especially in publicly traded firms, to have an incentive to come forward. The SEC goes to great lengths to keep the individuals identity confidential. Many believe that over time as people see these large payouts along with the confidence that their identity will remains a secret, that more and more high profile employees in the financial services industry will come forward to report wrong doing. The SEC does take into consideration the individuals’ involvement in any wrong doing as well as if the individual attempted to go through the firms’ internal compliance reporting procedures when determining the payout.
Since the programs launch the SEC has awarded $85 million to 32 individuals. The payments are made from a fund called the Investor Protection Funds that was established by Congress and is funded by the fines the SEC collects from violations. The funds current reserves stand at $400 million. If the fund drops below $300 Million, Congress requires that it be re-funded.
Learn more about the SEC Whistleblower Lawyers