The Securities and Exchange Commission has expended significant energy over the last few weeks issuing press releases where it assured the public that the first two whistleblower awards that have been announced (both were relatively small) will not be typical of future awards. Officials with the SEC have been on a campaign to inform the public that its new whistleblower reward program will include some very large payouts which it says will be announced shortly.
The first award announced by the SEC Whistleblower Office was for only $50,000. Officials say the reason for the small size was not the quality of the tip, but instead that the defendant had little or no ability to pay. The same problem plagued the second case, where the award to the tipster was only $120,000.
One SEC statement said that the agency expects to pay some "extremely significant" awards in the near future after receiving information that led to victories in important cases. The SEC says the slow initial pace of awards is due to the time it has taken to get the new program up and running and now that the first few cases have been dealt with successfully the hope is that future awards are dealt with at a much faster pace.
Experts say that while it's good to hear that the SEC is aware of a public perception problem, it's even more important that the SEC does what it says it will do and issue significant cash payments to whistleblowers who have uncovered substantial fraud. The fact is that without large rewards to those volunteering the information, the flow of tips about corporate wrongdoing will slow to a trickle. This is true of almost all whistleblower programs, but is especially the case in the context of the Wall Street firms the SEC's program is meant to police. Wall Street financial jobs are already very well compensated and whistleblower awards will need to be especially generous to compensate for the genuine risk to one's career by coming forward with information.
So far the whistleblower program has been successful in that it has led to valuable information that SEC enforcement officers have used to crack down on the companies it oversees. The information that the SEC has received has generally come from insiders who are very close to the source of the problem. This has been a great benefit to the agency as it has aided investigators in pinpointing the individuals responsible for misdeeds.
Though the SEC whistleblower program has been criticized for taking some time to get off the ground, it has moved much more quickly than the similar IRS whistleblower program. The SEC paid out its first whistleblower award in under a year while the IRS has taken a beating for moving at an outrageously slow pace turning around claims.
Sources:
SEC Whistleblower Rewards: Larger Ones Are Coming, by Erika Kelton, published at Forbes.com on June 26, 2013.
Another SEC Whistleblower, More On the Way, by Catherine Dunn, published at Law.com on June 18, 2013.
See Our Related Blog Posts:
SEC Whistleblower Program Up And Running But Paying Out Little
Impact of Sequestration on IRS Whistleblower Program
