SEC’s Proposed Whistleblower Program Sees Stronger Enforcement of Laws

Jack Humphrey, Regulatory journalist
November 10, 2010 /

The recently mapped out Whistleblower Program of the Securities and Exchange Commission (SEC) takes the campaign against violators of the federal securities laws to the next level, inviting more and more would-be whistleblowers with its new reward program.

With the SEC’s proposed program, would-be whistleblowers can now take an easy and quick procedure to provide the agency with high-quality information that may lead to the enforcement of administrative actions against securities laws violators. The proposed program takes its mandate from Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, authorizing the SEC to formulate reward programs for would-be whistleblowers.

Eligibility to the award calls for would-be whistleblowers to voluntarily provide an original high-end tip that reports any violations of federal securities laws. The SEC believes that the strategy would aid in enforcing a federal court or administrative action in which it obtains monetary sanctions of up to $1 million or more.

Mary Schapiro, SEC chairperson, laments that of the thousands of tips the SEC gets every year, only a handful of them “come from those closest to an ongoing fraud.” Schapiro believes that firsthand leads coming from whistleblowers play a crucial role in protecting investors and confiscating ill-gotten wealth from law transgressors.

According to the SEC, the Whistleblower Program also considers several interests that are in competition with each other. It adds that the proposed rule strikes a balance at the necessity to prod on whistleblowers to come to light “without promoting unintended consequences.”

The Commission opens an online public forum until December 17 where everyone can comment on the proposed program and any other relevant issues. After a thorough review of the comments, the SEC will take into account further steps to improve the Whistleblower Program.


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