In a major development, the U.S. Securities and Exchange Commission has made it easier to stop some of the fraudulent conduct on Wall Street. Corporate whistleblowers who report financial wrongdoing under the new program will now have a stronger incentive to speak out and report fraud and other bad conduct. This new rule comes as a result of last year’s Dodd-Frank Wall Street overhaul law. Whistleblowers will now be paid between 10 and 30 percent of sanctions over $1 million for original and useful information.
The rule does not require whistleblowers to first, or simultaneously, report problems internally. But in a concession to companies the final SEC version would make a whistleblower still eligible for a reward if he or she reports wrongdoing to the company, and the company, in turn, reports it to the SEC. A whistleblower can also improve the chances of receiving a higher percentage award by internal reporting, but the rule only protects the whistleblower from retaliation if the employee also reports wrongdoing to the SEC.
The new SEC rule greatly expands the agency’s authority to reward whistleblowers. Prior to Dodd-Frank, the SEC could only reward whistleblowers for tips on insider-trading cases. SEC Chairman Mary Schapiro said the new “rules are intended to the break the silence of those who see a wrong.” She added that the final measure struck the correct balance between encouraging whistleblowers to report problems internally when appropriate, while providing the option of heading directly to the SEC. Robert Khuzami, who is SEC enforcement chief, told the SEC’s public meeting on the subject that the rule was already encouraging people to come forward. People who provided tips after Dodd-Frank was signed into law last July could be eligible for a reward.
The SEC’s two Republican commissioners voted against the rule. Supporters of the rule, such as the National Whistleblowers Center, lauded the agency for resisting opposition from corporate lobbyists. The rule is expected to take effect 60 days after it is published in the Federal Register. As a matter of interest, the Commodity Futures Trading Commission is working on a similar rule.
Source: Insurance Journal
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