The U.S. Congress has greatly expanded incentives for whistle-blowers in the financial industry by creating a $451 million fund for reward payments.
Prior to the new plan, regulators decided how much to pay insiders for evidence of wrongdoing, which led to only $160,000 in payouts over the last two decades. Despite this, over 90 percent of U.S. Securities and Exchange Commission enforcements have started with a tip from a whistle-blower.
Under the new program, a whistle-blower who reports a wrongdoing will be guaranteed a reward when penalties reach over $1 million, from 10 to 30 percent, as long as the whistle-blower does not hold a compliance job with the company and was not involved in the wrongdoing.
The corporate sector is rallying against the new program, arguing that employees will attempt to take advantage of the law in an attempt to get the reward money. Some are afraid that employees will take information to the SEC rather than alerting the company’s own corporate compliance system, which would fix the problem.
Shortly after the program was announced, the U.S. attorney for the Southern District of New York warned that whistle-blowers who turn in false information could face criminal prosecution. He said that those who report false wrongdoings would be charged with perjury, which may include both fees and a prison sentence.