The Securities and Exchange Commission has officially launched its new whistleblower program, including a webpage for people to report a violation of the federal securities laws and apply for a reward.
The new program, which allows whistleblowers to earn a financial reward for providing “new and timely information” on securities laws violation, is enabled by the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, to gain a reward a whistleblower’s information must lead to a successful SEC enforcement action with over $1 million in monetary sanctions.
The website, launched on Friday, gives details such as eligibility requirements for a reward and how to submit a tip or complaint.
The SEC says it has been seeing better quality tips over the past few months, since Congress created the program, and also that the new reward system incentivizes people to come forward sooner rather than later.
"Early and quick law enforcement action is the key to preventing securities fraud and avoiding investor losses, and the whistleblower program gives us the tools to help achieve that goal," said Robert Khuzami, director of the SEC's division of enforcement.
With fewer than 4,000 employees regulating some 35,000 entities, the Commission says a whistle-blowing program such as this one is an essential tool in deterring wrongdoing, at firms where any such activity might otherwise go uncovered.
The program is also intended to provide extra tools to protect employees who come forward, and “significant incentives” for employees to talk to their internal compliance departments first.
“Therefore, companies that would prefer their employees report internally first are incentivized to a have credible, effective compliance program in place,” the organization said in a statement.