Counsel Jonathan Green Discusses the SEC’s First Whistleblower Payment in InsideCounsel
InsideCounsel reported on the Securities and Exchange Commission’s announcement that on August 21, 2012 it made its first whistleblower payment under a program authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The program makes whistleblowers eligible for rewards of up to 30 percent of what is collected in any SEC enforcement action that is aided by the whistleblower’s information. According to the SEC, the anonymous tipster received $50,000 in exchange for providing crucial documents and information that aided the investigation and enforcement action into a multimillion-dollar securities fraud.
The program was launched in August 2011 with the final order for payment on the first whistleblower award published a little over a year later. Kaye Scholer White Collar Litigation and Investigations Counsel Jonathan Green points out, “In that time, not only has the SEC received the tip, pursued a tip and investigated it, but they’ve also negotiated a settled case and released it to the public.” According to Green, “This is fast for the SEC. They clearly wanted to make the point that they’re taking tips seriously.”
However, one downside of the program is the worry that employees will now to straight to the SEC with any suspicions of wrongdoing rather than report it internally. This makes it even more important that corporations have strong internal whistleblowing systems that both accept anonymous tips and act on them effectively. Green agrees, adding “The worst thing for a corporation is to have someone report internally, sit on it and then have the person go to the SEC later.” As a result, Green says “The SEC will take a careful look at what the company did when it first learned this information.”