This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

SEC Stashes $439 Million to Reward Whistleblowers

By Hal M. Bundrick

NEW YORK (MainStreet) Under two months ago, the Securities and Exchange Commission's office of the Whistleblower (OWB) announced the largest award since the program began: a $14 million bounty for information that led to the recovery of "substantial investor funds."

The result? Increased awareness for a program seeking tips to stem investor fraud.

"This will open the floodgates -- the higher the lottery ticket the more people play," says Jordon Thomas, a partner with Labaton Sucharow. Thomas's practice concentrates on investigating and prosecuting securities fraud on behalf of whistleblowers and institutional clients.

"In the recent Wall Street Survey commissioned by Labaton Sucharow, there was a 20% increase in awareness of the SEC Whistleblower Program since last year," Thomas told MainStreet. "Following this significant award, awareness will continue to grow along with the number of whistleblower submissions that the SEC receives. At our firm, after the award was announced, we saw an immediate increase in the number of case evaluation requests that we received."

The OWB reports the number of whistleblower tips and complaints the Commission received increased from 3,001 for the 2012 fiscal year to 3,238 in 2013. Since the program was established in August 2011, the Commission has received 6,573 tips and complaints from whistleblowers.

It's quite possible even more substantial awards will be offered to tipsters in the future. Under the program, individuals who voluntarily provide the Commission with original information that leads to a successful enforcement action resulting in monetary sanctions of over $1,000,000, may be eligible to receive an award equal to between 10 and 30% of the monies collected by the Commission.

The SEC has banked over $439 million to pay future awards.

But many whistleblowers fear retribution from employers.

"The best protection against retaliation and blacklisting is to report possible violations anonymously," Thomas says. "The SEC Whistleblower Program permits anonymous reporting if the whistleblower is represented by legal counsel. Sophisticated whistleblower attorneys use numerous strategies to further protect the identity of their clients."

Although whistleblowers must disclose their identity to the Commission before they can be paid an award, the SEC does not publicly disclose whistleblower identities when it announces awards.

The first award was issued on August 21, 2012, for a tip leading to shutdown of a multi-million dollar fraud. In June of this year the Commission announced it had issued an award to three whistleblowers that helped shut down a sham hedge fund.

"The most common violations reported in recent years have been financial reporting violations, offering frauds and market manipulations," says Thomas.

While tips have been received from all 50 states during the past year, California tops the list for 2013 whistleblower leads, outpacing New York, the state that provided the most tips in 2012. Since the program began, leads have been received from 68 countries outside the U.S., with the U.K. surpassing China this year as the biggest source of international tips.

--Written by Hal M. Bundrick for MainStreet

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,614.81 +215.14 1.31%
S&P 500 1,941.28 +37.27 1.96%
NASDAQ 4,419.4780 +103.4040 2.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs