SEC Whistleblower Program Proposals: Another dismal failure or real opportunity?
Senate Banking Committee Chairman Christopher Dodd of Connecticut introduced a financial reform bill on March 15, 2010. The proposal includes a new whistleblower program to reward those who assist the Securities and Exchange Commission (SEC) in its enforcement of securities violations, like violations of the Foreign Corrupt Practices Act.
The SEC already has a program in place to reward whistleblowers in insider trading programs. The existing program is widely regarded as a dismal failure, having paid only four rewards totaling only $67,570. In the last year, at least three proposals have been discussed to establish a new SEC whistleblower program, including the most recent Dodd proposal.
Dodd’s bill proposes that whistleblowers who provide original information that leads to monetary sanctions would be paid between 10and 30 percent of any money the government collects that results from the information provided by the whistleblower. Whistleblowers would also receive rewards if their information leads to other successful “related actions,” i.e. actions brought by other federal and state regulatory agencies, including the DOJ and foreign law enforcement agencies.
Most commentators watching the process feel that the final version of the new SEC program will be very similar to the IRS whistleblower rewards program. They expect the SEC program will include the IRS’s one bite rule, for example, though the IRS itself appears to be moving away from full implementation of the civil investigation prohibition against talking to tax whistleblowers more than once. The Service’s criminal division never adhered to the one bite rule, and now, the IRS civil division is embracing whistleblowers to a greater degree as well. It would be unfortunate if any new SEC whistleblower program blindly adopted IRS rules, like the one bite rule, without learning from the IRS’s mistakes. The SEC has a dismal record with whistleblower incentive and protection programs. It would be best for the American people if any new SEC provision learned from, rather than repeated, the mistakes of other whistleblower programs.
This entry was posted on Monday, April 5th, 2010 at 5:38 pm and is filed under SEC Whistleblower Program. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.