Daily Dose: Blowing the Whistle to Stop Fraud, Get Rich

Businesses are up in arms about a proposed plan from the Securities and Exchange Commission to pay corporate whistleblowers. Employees who provide tips or sound the alarm over corporate abuses could earn 10-30% of the money they help the SEC recover. Depending on the size of the settlement, that could be worth millions of dollars. The proposal, which comes in the wake of the recent financial crisis and corporate bail-outs, is up for a vote on Wednesday. According to the Washington Post, businesses have criticized the plan on a number of points:

Mainly, they argue that before whistleblowers share information with the SEC, they should alert the company they are accusing and give the company a chance to address the alleged misconduct.

Some business groups have said they are worried the SEC could be overwhelmed with tips. They say they want to ease the burden on the regulators by helping screen the complaints.

“Companies are far better equipped to assess complaints in the context of their particular business and to ‘separate the wheat from the chaff,’” two major Wall Street groups, the Financial Services Roundtable and the American Bankers Association, said in a December letter to the SEC.

Businesses Criticize Whisteblower Plan

Given the serious repercussions of another financial meltdown, these complaints ring pretty hollow. Enforcement agencies often rely on important inside information from employees. But retaliation is a serious threat; many workers risk their jobs to report abuses to regulators. A monetary reward might help encourage an employee to come forward, or cushion the blow if they are fired for speaking out. The flip side is that disgruntled workers may have an added incentive to making false claims. Even if a company is cleared of any wrongdoing, the act of being investigated by the SEC could be very damaging to their reputation.

Should government regulators pay employees for blowing the whistle on their employers? Is this a good way to regulate business or is the system ripe for abuse?


“Daily Dose of the Washington Post” is a blog series created by GovLoop in partnership with The Washington Post. If you see great a story in the Post and want to ask a question around it, please send it to [email protected].

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