Although many progressives have criticized the Dodd-Frank Act as too weak, it clearly has some very positive features. An undisclosed Wall Street whistleblower was just awarded $14 million for information that led to the recovery of millions of dollars in investor funds.
Without the tip, the US Securities and Exchange Commission (SEC) might not have uncovered the Wall Street fraud.
SEC whistlebower monetary awards were made possible by a provision in the Dodd-Frank Act that set up a fund to encourage individuals to step forward with information about financial crimes and regulatory violations. The law also requires that the SEC maintain the confidentiality of the whistleblower.
According to an early October news release from the SEC:
Payments to whistleblowers are made from a separate fund previously established by the Dodd-Frank Act and do not come from the agency’s annual appropriations or reduce amounts paid to harmed investors.
The award is the largest made by the SEC’s whistleblower program to date.
The SEC’s Office of the Whistleblower was established in 2011 as authorized by the Dodd-Frank Act. The whistleblower program rewards high-quality original information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10 percent to 30 percent of the money collected in a case.
The Dodd-Frank law even established “The Office of the Whistleblower,” with its own web page. Sean McKessy, chief of the SEC whistleblowing division, writes:
Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission. Through their knowledge of the circumstances and individuals involved, whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.
This is the kind of regulation enforcement tool that drives Wall Street, the Koch Brothers, and the financial industry backers of both parties to hurl gold plated dinnerware out their windows.
It’s ironic that there is nothing like money to encourage people to come forward with information about financial malfeasance. But at least the whistleblowers to the SEC are receiving their compensation for honest actions that help, in a small way, expose financial market wrongdoing.
It will become a more credible tool if and when we start to see the “banks too big to fail” in the crosshairs of whistleblowing enforcement.