How The New SEC Whistleblower Award Program Works

The Dodd-Frank Wall Street Reform Act of 2010 gave the SEC greater power to investigate and punish securities fraud. One of the SEC’s new tools is the Office of the Whistleblower, which works directly with citizens who want to give information about possible securities violations.

What kind of information qualifies for the Whistleblower reward?

In order to qualify for a whistleblower reward, the information must be previously unpublished, and based on original analysis by the whistleblower. The SEC will not reward information it already has, or information based entirely on published sources.

The information has to be substantial enough that the SEC can act on it. For example, information that persuades the SEC to reopen an old case or start a new one both qualify. If the information changes the direction of an ongoing investigation, or reveals a new angle to the case, it may also be rewarded. However, there will be no reward unless the SEC collects at least $1 million in fines. According to SEC Chief Mary Shapiro, these new regulations have been bringing in “better quality tips”.

Can anyone be a whistleblower?

The sec whistleblower program is intended to encourage people who don’t already have an obligation to report to the SEC. Most employees qualify under the program, but outside auditors and members of the Board of Directors do not, since reporting possible fraud is one of their normal responsibilities.

The Act also excludes anyone who is involved in the criminal scheme that they are reporting, or anyone who gets their information illegally.

Whistleblower rewards can be as much as 30% of what the SEC collects.