The Dodd-Frank Wall Street Reform Act of 2010 (Dodd-Frank) empowered the Securities and Exchange Commission (SEC) to extend monetary awards to whistleblowers who provide tips and original information to authorities that lead to an enforcement action with sanctions that exceed $1 million. Under the act, reporting parties can receive between 10 percent and 30 percent of the amount of penalties collected. The new law bolstered the previous statute that only allowed whistleblower payments to those who assisted with insider trading cases. Late last month, an order was entered granting a foreign tipster over $30 million for blowing the whistle on an SEC enforcement case. Although the nature of the case was not disclosed, the value of the award would indicate that a high value and penalty was placed on the information brought forward.
More Than Double Previous Awards
The $30 million payout is reported to be more than double the amount of the next highest whistleblower award in previous cases. According to Andrew Ceresney, director of the SECs enforcement division: This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect. The case transcript included reference to the award potentially being even bigger had the whistleblower come forward in a more timely fashion, but due to the delay in reporting, the award was actually reduced.
Of the 14 whistleblowers who have received awards since the SEC program went into effect in 2011, four have been persons living abroad. Such parties are actually encouraged to come forward:
Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws, noted Sean McKessy, of the SECs whistleblower division.
Appeals Court Caution
Notwithstanding the position taken by SEC officials that foreign whistleblowers are covered by the act, last August an appeals court ruled that the acts anti-retaliation protections did not cover a foreign worker, and in support of that ruling, it cited a U.S. Supreme Court decision from 2010 that held that the legislation does not apply abroad unless there is evidence Congress indicated otherwise. However, in last months case, the SEC specifically rejected the applicability of the Supreme Court ruling to the present facts. Apparently, only the anti-retaliation aspect is questionable and not the award feature of the act.
Push to Boost Awards
Recently Attorney General Eric Holder announced in New York that whistleblower payouts should in fact be increased, and he suggested a separate initiative to motivate more tipsters to come forward. His plan also calls for greater FBI surveillance of the financial sector in an effort to ferret out misdeeds.
Peyman Khosravani is a global blockchain and digital transformation expert with a passion for marketing, futuristic ideas, analytics insights, startup businesses, and effective communications. He has extensive experience in blockchain and DeFi projects and is committed to using technology to bring justice and fairness to society and promote freedom. Peyman has worked with international organizations to improve digital transformation strategies and data-gathering strategies that help identify customer touchpoints and sources of data that tell the story of what is happening. With his expertise in blockchain, digital transformation, marketing, analytics insights, startup businesses, and effective communications, Peyman is dedicated to helping businesses succeed in the digital age. He believes that technology can be used as a tool for positive change in the world.
