Whistleblowers Can Get Paid To Track Down Financial Fraud

Despite objections from businesses, the Securities and Exchange Commission has passed a new rule that will allow whistleblowers to get up to 30% of any money the SEC recovers based on their tips. The rule also exempts whistleblowers from having to reveal their findings to the companies they’re reporting before going to the government.

The Washington Post blew the whistle on the story:

“Today’s rules are intended to break the silence of those who see a wrong,” SEC Chairman Mary L. Schapiro said. “For an agency with limited resources like the SEC, I believe it is critical to be able to leverage the resources of people who may have first-hand information about potential violations of the law,” Schapiro said. …

Republican commissioner Kathleen Casey said that, by allowing whistleblowers to bypass companies’ internal compliance programs and go straight to the SEC, the agency might not be able to review the allegations quickly, letting violations grow more serious. She said the SEC was overestimating its own ability to sift through complaints from tipsters.

The rules were hailed by advocates for financial transparency and whistleblowers’ rights. “Knowing that whistleblowers are being encouraged to dime them out will make the next Madoff think twice and three times before they go down a bad path,” said Dean Zerbe, who a lawyer who represents informants.

SEC approves new rewards for whistleblowers [The Washington Post]