SEC Declares Dodd-Frank Act Whistleblower Bounty Program “Open for Business,” Issues First Program Award

On August 21, 2012, the U.S. Securities and Exchange Commission awarded its first ever whistleblower bounty under the Dodd-Frank Act.  The bounty, awarded to a whistleblower who provided the Commission with documents and information that expedited its investigation of fraud on investors, was awarded just over one year after the SEC’s Dodd-Frank whistleblower regulations took effect.

The SEC did not release any details on the company implicated in the fraud or the substance of the whistleblower’s report.  The Commission’s press release stated that the whistleblower’s assistance ultimately resulted in a court ordering over $1 million in sanctions and that the whistleblower will receive the maximum bounty of 30% of the sanctions collected.  The whistleblower has currently received only $50,000 because the SEC has collected only $150,000 of the total sanctions imposed.

Mary L. Schapiro, SEC Chairman, stated that “[t]he whistleblower program is already becoming a success.”  Sean McKessy, Chief of the SEC’s Whistleblower Office, added that since the bounty program was established in August 2011, about eight tips a day have been submitted to the SEC.  He also stated that “[t]he fact that we made the first payment after just one year of operation shows that we are open for business and ready to pay people who bring us good, timely information.”

The SEC’s first bounty award makes real the incentive for whistleblowers to report suspected fraud and compliance-related issues directly to the SEC.  In light of this, employers should review their compliance reporting policies and consider making revisions that stress the value and importance of internal reporting.

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