The SEC Whistleblower Program in Enforcing the Finance Securities Laws

The constitutional body was formed during the global financial crisis. The number of reported scandals in organizations was very high and this had a negative impact on the markets. Various bodies tasked with safeguarding the public funds came up with the idea of rewarding people who would voluntarily provide proof to penalize people who breach the securities laws. The move was in realization that the investors were not protected in the markets and there was a need to use professional help in the enforcement of new provisions. The SEC Whistleblower Program was established in July 2010 through legislation.

Once eligible whistleblowers are identified, their submissions are reviewed by the Office of Market Intelligence. Since individuals may have different motives for submitting tips or complaints, a team of experts evaluates the information provided to ensure it is reliable and whether a team investigators should be assigned to them. After the review process, the information is retained by the body and may be used in another investigation in the future. As of early last year, all the submissions presented to the commission were under investigation. To encourage prompt reporting of securities violations, the rewards to the whistleblowers varies depending on when they submit their tips. For example, if a person submits information before the act occurs, they receive a higher reward than those who report after the incident has already happened.

The SEC Whistleblower office mainly focuses on securities breaches which have not occurred or ones that have taken place in not more than five years. About 1,000 cases are investigated by the commission’s enforcement division annually. Very few of the annual submissions qualify for an SEC enforcement action. If the sanctions imposed on the defendant organization are less than $1 million, the whistleblower cannot be rewarded. In some cases, the investigations may take as long as four years to be concluded. Once the commission’s enforcement division completes the investigation and the monetary sanctions are collected, the information is posted on the official website. The whistleblowers are expected to claim the award within the following ninety days.

Not all the whistleblowers receive the awards. Some of the reasons why they may be denied include the provision of incorrect information to the commission, failure to observe set rules for claiming the award, and if a person fails to file the claim during the provided ninety days. A whistleblower can receive as much 30% of the amount collected from the sanctions.

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