South Carolina Criminal Lawyer Blog

According to the New York Times, the Securities and Exchange Commission approved rules on a $300 million whistle-blower program. The provisions were partly incorporated since the agency failed to uncover the Ponzi scheme of Bernard Madoff. The new rules allow the S.E.C. to provide payment of 10 to 30 percent of the penalties collected to tipsters when the amount exceeds $1 million. The size of the reward will depend on the value of the tips provided and the tipster's cooperation. Further, a whistle-blower is permitted to bypass the company without giving them a chance to investigation the allegations and provide information directly to the S.E.C.

Several individuals involved in the S.E.C. do not believe that these rules will create a reduction in this type of crime. Rather, many argue that white collar crime and fraud will be prolonged because the S.E.C. will react slower than the companies themselves. Opponents of the new rules also state that the S.E.C. will likely not be able to handle the overflow of complaints that will occur in the future. However, Sean McKessy, the chief of the S.E.C.'s whistle-blower office, explains that the agency will be able to improve on its ability to distinguish credible tips from false leads because whistle-blowers will be required to provide sworn statements under penalty of perjury. On the other hand, the United States Chamber of Commerce believes that this will only cause attorneys to advise potential whistle-blowers to bypass the company and go straight to the S.E.C. The Chamber of Commerce did not address the incentive that whistle-blowers would have to receive an increased reward if the company was notified first. Of course, the rules exclude persons involved in the wrongdoing from receiving an award. It is not yet known how future whistle-blowers and attorneys will react to this new set of rules.

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