29 August 2012

Whistleblower bags first post-crunch pay-out

US regulators have doled out the first whistleblower payments under new regulations brought about by the Dodd-Frank reforms.

Washington DC: home to the SEC

The US Securities and Exchange Commission paid out $50,000 (£31,000) to an unidentified person who alerted the authorities to a multimillion-dollar financial fraud. The agency is prohibited from releasing details that could reveal the individual’s identity.

Whistling daily

Sean McKessy – who heads the SEC’s whistleblower office – said the agency had received around eight tip-offs daily since the programme was established a year ago. ‘The 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,’ Mr McKessy commented.
Under the scheme, the whistleblower is entitled to 30 per cent of the sanctions as they are collected, which could see the informer bag $300,000, as in this case, the court ordered more than $1 million in sanctions, of which $150,000 has already been collected.

Lack of transparency

Not everyone is happy with the pay-out. ‘Paying an award to a whistleblower without lending transparency to the scheme and identifying the wrongdoer serves no public purpose,’ Reuben Guttman, who heads the whistleblower practice at the law firm Grant & Eisenhofer, told the Wall Street Journal.
Lyle Roberts, a securities litigation partner in Cooley's Washington DC office, told London-based newspaper Legal Week: ‘The bigger news out of this is the volume of calls they're getting, and what type of calls those are... They claim a lot of these calls are of high quality and drop hints that unlike this first pay-out, which seems more of a vanilla case, some callers are corporate insiders who are aggressively giving them information about corporate problems.’
There is little that general counsel can do, concedes Mr Roberts, ‘other than making sure your internal compliance systems and internal whistle blowing systems are working [so as to avoid] being part of one of those tips.’

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