The United States Securities and Exchange Commission recently updated its whistleblower program to provide monetary incentives to employees who report misconduct within their companies directly to the government.
The Dodd–Frank Wall Street Reform and Consumer Protection Act, passed last July, required the SEC to pay 10 to 30 percent of any monetary sanctions over $1 million levied after company misconduct to the whistleblower who reported it. Congress hopes the law will encourage employees to alert the government to fraud and mismanagement.
Corporations argued against the provision, saying the rules do nothing to encourage employees to contact management to the problem first, potentially fixing the issue at a much lower cost to the company. They sought a mandatory internal reporting requirement, but that idea was ultimately thrown out.
Instead, the SEC suggested it would push potential whistleblowers to report any misconduct internally first by increasing incentives if evidence showed the employee tried to fix the issue internally before contacting the authorities.
In addition, the SEC has decided to pay whistleblowers who come forth even after it has begun an investigation, greatly increasing its power to gather information about any suspected misconducts.
The new rules also provide whistleblowers with strong protections against employer retaliation, even if the SEC decides not to investigate the whistleblower’s claim.
The new rules are expected to see some flack from Congress, but insiders expect it to go forward without any significant delays.