The past several years demonstrated that the U.S. Securities and Exchange Commission’s (SEC) whistleblower program is a powerful tool in the government’s effort to curb Wall Street corruption. The key to its effectiveness has been its massive incentive provision—whistleblowers can reap 10% to 30% of the funds that the government recovers, numbers sometimes reaching tens of millions of dollars. Keeping all of this in mind, I am troubled by the SEC’s vote in June to propose changes to its whistleblower program that could significantly reduce whistleblower incentives in significant cases. While the new rules are only proposed for now, not final, they appear to be a troubling attempt to disincentivize Wall Street whistleblowing, an act that will turn the financial markets back into the Wild West, with effects here in Mississippi. I have linked to the notice of the proposed rules below.
If you are considering exposing financial or any other type of fraud, contact an experienced whistleblower attorney first. The SEC and Department of Justice prosecute very few whistleblowers’ fraud claims, and only those that are prosecuted result in any compensation for the whistleblower, so positioning your claim effectively is critical. I have the experience to help you through the process. Call me today at (601) 790-1505.
The SEC’s Current Rules
Since the SEC made its first payout in 2012, the agency has paid out $160 million to 46 whistleblowers. This past March 2018, the SEC awarded three whistleblowers $83 million as an award for their tips regarding fraud at Bank of America. Currently, these large awards to whistleblowers are merely a function of math, meaning that if you tip the SEC off to $100 million in fraud, you recover 10% to 30% or $10 to $30 million.
The SEC’s Proposed Rules
Under the SEC’s proposed rules, massive awards—rewards for tremendous personal risk—would be discretionary. While the proposed rules allow for payouts for whistleblowers in cases that are currently too small to qualify for the SEC’s program, this shift is troubling. Remember, whistleblowers often risk their career, friendships, and reputation to expose fraud. While it is a nice gesture to open up the SEC whistleblower program to low dollar value fraud, it often just is not worth the risk to expose minor fraud. On the other hand, the SEC’s very purpose is to police large-scale fraud that affects citizens across the country, so by weakening its award program for the largest-scale fraud, it disincentivizes reporting the most critical financial fraud.
In short, the SEC’s proposed rules incentivizes whistleblowing in low-end cases where the risk is rarely worth it and disincentivizes whistleblowing in cases of massive fraud that affect the most people. This seems backward and should not be adopted as a final rule.
What Should You Do if You are Considering a Whistleblower Claim?
Do you know about fraud occurring in a publicly traded company? Are you considering filing a whistleblower case? The proposed rules discussed above are not currently in effect, and huge bounties are available with insider information regarding fraud in the finance industry. To protect your career, reputation, and family and to attain your fair share of compensation, you will require the help of an experienced whistleblower attorney.
Call Barrett Law now at (601) 790-1505 if you think you may be a whistleblower.
Experienced whistleblower lawyer Barrett can provide you with the advice you will need to file a successful SEC whistleblower program case. Having expert legal advice by your side can mean the difference between receiving your share of a whistleblower judgment and losing your career and livelihood. Call us today.
