The Securities and Exchange Commission (SEC) has paid its first “bounty” to a whistleblower in its one-year-old program under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the program, a whistleblower providing “original information” that aids an SEC enforcement action and leads to $1 million or more in penalties can receive 10 to 30 percent of the sanctions the SEC collects.
This whistleblower received $50,000 for helping the SEC “stop a million dollar fraud.” The individual provided documents and other information that “accelerated” the SEC investigation. The defendant company was ordered to pay more than $1 million in penalties, $150,000 of which has been collected so far.
The program, which the SEC says generates approximately eight tips per day, is strongly opposed by business groups who say that it turns whistleblowers, who are often employees, into “bounty hunters.” Businesses fear that the potential for monetary reward causes whistleblowers to go around a business’s internal processes to go directly to the SEC with suspected violations. The program currently does not require whistleblowers to report using internal processes first. A bill was proposed in the last federal legislative session that would require this, but it is has not become law.