SEC adopting new system of whistleblower awards

AP News
Posted: May 25, 2011 12:05 AM
SEC adopting new system of whistleblower awards

Federal regulators are adopting a new system of paying awards to whistleblowers who report fraud or other violations at companies to the government.

Under the new system, the Securities and Exchange Commission will pay sizable cash awards to people who come forward to provide the agency with original information that leads to an enforcement action resulting in more than $1 million in penalties. Whistleblowers will be eligible to get as much as 30 percent of the money the SEC recovers from a company or individual.

The SEC was scheduled to vote Wednesday to adopt the whistleblower program. It was mandated under the financial overhaul law enacted last year.

Some major U.S. companies _ including AT&T Inc., Best Buy Co., FedEx Corp., Google Inc., Target Corp. and Verizon Communications Inc. _ and the U.S. Chamber of Commerce have lobbied furiously against the new system since the SEC proposed it in November. They argue that whistleblowers should first be required to go to authorities in their companies and give them the chance to correct problems, rather than going straight to the SEC.

Otherwise, companies' internal compliance programs and the chance of stopping wrongdoing sooner will be undermined, the corporations contend.

On the other side, advocates and lawyers for whistleblowers say they would be chilled by being required to go to their company officials first.