SEC’s new whistleblower website – ‘winning’ Dodd-Frank style

By Guest Contributor
August 18, 2011

By John Sutton

Aug. 17  (Business Law Currents) – As the fabled story goes, almost a decade passed between the time that fraud investigator Harry Markopolos first submitted evidence of the Bernie Madoff Ponzi scheme to the SEC’s Boston office and his arrest in late 2008.

With the adoption of the new whistleblower program under Section 922 of the Dodd-Frank Act and the release of the program’s related website specifically designed for whistleblowers to provide tips, the SEC is now able to get serious about following up on whistleblower leads.

Through its mishandling of the Madoff case, the SEC learned that coordination is a key element of dealing with whistleblower tips. During the time Madoff was defrauding investors, the SEC was receiving tips and evidence about him and others through letters, phone calls, faxes and emails. These were often kept in file cabinets instead of a computer database which made the connecting of dots difficult in many investigations.

The SEC’s new Office of the Whistleblower program, which went into effect recently, includes an easy to use website designed for potential tipsters to report securities law violations. It is a continuation of the strengthened investigative abilities gained by the SEC through the development of its TCR (Tips, Complaints and Referrals) database which started in late 2010.

The whistleblower website provides an all-in-one-place platform where those with knowledge of securities laws violations can find everything they need to know to fill out the newly available Form TCR. This form can be submitted online, via fax or via mail.

The homepage touts that high-quality, original information leading to an enforcement action in which over $1,000,000 in sanctions is ordered could provide an eligible whistleblower with an award of 10 percent to 30 percent of the money collected.

The Office of the Whistleblower’s website also includes the qualifications involved for whistleblowers (an “eligible whistleblower” is defined on the website as, “a person who voluntarily provides the SEC with original information about a possible securities law violation”), and qualifications for the kind of information involved (“original information” is defined as “information derived from the whistleblower’s own independent knowledge and not from sources known to the public”).

In addition, the website includes a frequently asked questions section that includes information on whistleblowers’ usage of their companies’ internal compliance programs, remaining anonymous while providing information to the SEC, factors used by the SEC in determining the amount of awards and protections available to whistleblowers in cases of company retaliation.

(This article was first published by ThomsonReuters’ Business Law Currents, a leading provider of legal analysis and news on governance, transactions and legal risk. Visit Business Law Currents online.

This article was first published by ThomsonReuters’ Business Law Currents, a leading provider of legal analysis and news on governance, transactions and legal risk. Visit Business Law Currents online at http://currents.westlawbusiness.com.)

 

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