For Whistle-Blowers, Expanded Incentives

by Edward Wyatt for The New York Times, November 14th, 2010.

When insider-trading scandals plagued the financial markets in the late 1980s, lawmakers created a bounty program for whistle-blowers, allowing regulators to reward tipsters who uncovered evidence of manipulation. The effort largely failed, in part because the issue of whether to make a reward payment was left to the discretion of regulators. In 20 years, the program paid out a total of less than $160,000 to a handful of whistle-blowers.

Now, Congress and financial-market regulators are revamping a reward system for whistle-blowers, offering big payouts for tips about a host of securities and commodity law violations, to be doled out from a new $451 million fund. The potential rewards are huge. Had the law been in effect, anyone who tipped off the Securities and Exchange Commission to the activities in its recent case against Goldman Sachs, for example, could have raked in $55 million to $165 million.

Already, business executives and trade groups are arguing that those lottery-size windfalls, authorized under the sweeping law that overhauled the nation’s financial regulatory system, will make it harder for companies to police themselves and will pit employees in search of a big payday against a company’s effort to make sure it is obeying the law. (continue reading… )



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