The Securities and Exchange Commission is busy handling a deluge of whistleblower tips. An average of 7 tips per day has forced the SEC to triage the tips. Whistleblowers stand to receive substantial monetary awards for tips that lead to successful SEC action (“SEC Enforcement Division Buried in Whistleblower Tips,” by Ian Thoms, Law360). In accordance with the Dodd-Frank financial reform act, whistleblowers may receive from 10 percent to 30 percent of SEC recoveries greater than $1 million.
The whistleblower rewards program appears to offer great promise. It gives the SEC a head start in identifying and dealing with fraudulent conduct. While the securities and financial services industries initially complained that these financial incentives would prevent companies from dealing with violations in-house, as employees hoping to “strike it rich” would go straight to the SEC, the benefits of the program clearly outweigh the negatives. “I’ve seen great tips come in,” Thomas Sporkin, chief of the SEC’s Office of Market Intelligence,” was quoted as saying, adding: “There is a feeling here that we want to pay awards.”
The SEC expects to issue its first series of awards very soon. “This is going to explode once the first award comes down, Fogel was quoted as saying, adding: “The program is only going to get bigger and bigger.”
Under the SEC’s rules, whistleblowers must tip through an attorney in order to remain anonymous. Fogel said that attorneys would probably handle whistleblower tips on a contingent fee basis (i.e., attorney’s fees would be a percentage of any award; no award, no attorney’s fees).
Atlanta investor attorney J. Boyd Page of Page Perry observed that “the whistleblower program promises to become one of the most valuable tools in the SEC’s arsenal. It rewards people for reporting fraud and serves as a deterrent against fraud. We have already been involved in a variety of whistleblower matters and expect to see this area of our practice expand rapidly.”
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.