SEC proposes changes to its rules: what are the pros and cons of rewarding whistleblowers?

01/08/2018 – WINSEC-logo.png is delighted to publish this GAP blog on the proposed changes to the SEC whistleblower reward program rules. The piece highlights some of the pros and cons of financial rewards or “incentives” to individuals who report wrongdoing in the financial sector. Those who report to the SEC can come from any company listed on the US Stock Exchange, which means whistleblowers approach the SEC from all around the world with information on corporate wrongdoing. This international reach along with the successful and high profile prosecutions the SEC has been able to mount against companies who breach SEC rules, and the high monetary value of some of the rewards paid out to whistleblowers, has sparked the interest of financial regulators in other jurisdictions in the concept of financial incentives as a means to increase their regulatory effectiveness.

Financially rewarding or offering bounties to those who can provide specific regulatory or criminal information is often juxtaposed against the compensation that should be provided to whistleblowers for any losses they suffer when speaking out about a range of wrongdoing. Though rewards and compensation are both financial in nature, they clearly serve different ends. Likewise other tools—also developed in the US system—that specifically empower whistleblowers by actively engaging them in the resolution of the wrongdoing or in holding the wrongdoers to account, as in the US False Claims Act approach to tackling fraud from government or the rules governing how the US Federal Office of Special Counsel reviews investigative findings with whistleblowers, are often overlooked in the “rewarding whistleblowers” debate.

WIN will continue to host discussions and debates on these issues (and more!) to encourage wider and better informed debate on good practices in promoting public interest whistleblowing and protecting whistleblowers around the world.

Continue reading