New SEC Rules Offer Incentives to Whistleblowers

The US Securities and Exchange Commission has adopted new rules to expand its authority to reward whistleblowers with the use of financial incentives.

(May 26, 2011) — The   US Securities and Exchange Commission (SEC) has adopted rules to create a whistleblower program that rewards individuals who provide the agency with high-quality tips that lead to successful enforcement actions.

The new rules, which passed by a vote of 3-2, could urge Wall Street whistleblowers and other industry insiders to come forward more frequently to alert the SEC about securities violations.

“For an agency with limited resources like the SEC, it is critical to be able to leverage the resources of people who may have first-hand information about violations of the securities laws,” said SEC Chairman Mary L. Schapiro in a statement. “While the SEC has a history of receiving a high volume of tips and complaints, the quality of the tips we have received has been better since Dodd-Frank became law. We expect this trend to continue, and these final rules map out simplified and transparent procedures for whistleblowers to provide us critical information.”

According to the regulator, the new SEC whistleblower program, authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, is aimed at rewarding individuals who act to expose violations and who provide significant evidence that helps the SEC bring successful cases. Under the new program, awards will depend on the quality and timeliness of the information, which must lead to successful enforcement actions with sanctions of at least $1 million.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742