RIGHT OF THE DAY: Large money award for reporting violations of financial regulations

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YOUR RIGHT OF THE DAY: You are entitled to a substantial “whistleblower award” for providing original information to the government about violations of federal financial regulations that leads to successful enforcement action where the penalties involved are over $1 million.1Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §
78u-6(b)(1), and Rule 21F-3(a) thereunder, 17 C.F.R. § 240.21F-3(a)

That’s a pretty complex sentence, but you’ll be glad you got through it when you hear what it could mean for you. Get your whistles out.

Last week, the federal Securities and Exchange Commission (agency that regulates financial markets, like the stock exchange) announced it will grant an award of over 30 million dollars to a whistleblower2a person who reports violations of law to the government for providing “key original information that led to a successful SEC enforcement action.” Although the SEC secures the anonymity and confidentiality of whistleblowers, we do know that the person lives in a foreign country. So theoretically anyone on the planet is eligible for these huge awards.

If you’re thinking, “so this is where our tax money is going?”, not to worry, as the award money comes from the funds the government receives when it collects penalties from the people or organizations who have violated the law.

The award given here is the largest since the program was created in 2010 (as part of the Dodd-Frank financial reform). But believe it or not, the award could have been even larger in this case! The program gives eligible whistleblowers between 10-30% of the penalties received from violators, depending on such factors as the significance of the information, or any delay in reporting the information. Because of confidentiality, we don’t know the size of the penalty collected here, but we do know that the award was reduced in this case because of the whistleblower’s “unreasonable delay.”

If you think you have a qualifying juicy tip, go to www.sec.gov/whistleblower.

Do you think the whistleblower award program appropriately incentivizes people to do the right thing and report violations of law? Or does it reward people (very handsomely) for doing things they should already be doing? Let us know your thoughts in the comments.


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