SEC Whistleblower Program in Securities Market Enforcement

The Securities Exchange Commission rolled out the whistleblower program in 2010.

In light with the global financial crisis that severally affected the country, there have been several debates of how the cycle of the corporate scandals happening in the securities marker could be broken.

It was evident that law enforcement was not efficiently policing the marketplace and there was a need for a more effective solution. In 2010 the US Congress created a revolution in the enforcement within the securities market by developing the SEC Whistleblower Program which provides employment protections and also offers monetary awards to an individual that reports an incident of insider trading anonymously.

Whistleblower

SEC Whistleblower Program offers rewards to the eligible whistleblowers who are able to avail genuine information that could result to carrying out a successful enforcement action that includes civil penalties on the perpetrator of an amount exceeding $1 million.

The whistleblower is compensated for their noble action with 10-20% of the monetary penalties that are collected on the action that is brought by the Securities Exchange Commission and other authorities that get involved in the case. The Congress enacted this law under the Dodd-Frank Act for the reward to act as a motivation for the people with inside knowledge to offer help to the government in prosecuting people that are in violation of the securities laws.

SEC Whistleblower Program is currently being used by the SEC whistleblower office in uncovering investment fraud in various organizations across the country and halting ongoing fraud.

The program has proven to be effective because since its inception it has received approximately 22,000 tips. Some of these have resulted in enforcement actions, collecting to a total of $1.5 billion in monetary penalties on the lawbreakers. The office has also paid over $322 million in rewards to the whistleblowers of the prosecuted cases.

The 2017 report indicates that 19% of the tips received through the SEC Whistleblower Program relate to corporate disclosures and financials, 18% are on fraud, a further 12% relate to cases of manipulation. The states that recorded the highest number of tips in 2017 include New York, New The jersey, California, and Texas.

The SEC Whistleblower award and program has shown more benefits over other reward programs created by enforcement authorities. The reason is that the program supports anonymity in reporting the cases while other programs like the IRS Whistleblower Program does not.

Sometimes the investigations might take longer than two years even sometimes going up to four years to be completed. They only act on tips that are supported by strong evidence that is timely and credible.

Written by
Editorial Staff
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