News & Announcements
Please enter your email below to subscribe
The SEC announced this week that it has awarded the first payment from the whistleblower program that was established under the Dodd-Frank Act, as Law.com reports. A $50,000 payout was awarded to an unnamed individual who the SEC says helped to prevent a multi-million dollar fraud from occurring. Most experts agree that it is significant that the SEC allowed the whistleblower to remain anonymous, even though that is not a requirement under the law. Whistleblowers are entitled to between 10% and 30% of any court-ordered sanctions of $1 million dollars or more, as the sanctions are collected. In this case, an initial $150,000 of the total was collected from the company at fault, and the SEC decided to immediately award the maximum 30% to the whistleblower. As more of the total sanction is collected, the whistleblower stands to collect even more.
All of this means that companies will have to be even more vigilant in maintaining internal compliance programs. The prospect of large monetary awards and confidentiality for whisteblowers means that the SEC will most likely continue to receive more and more tips about corporate wrongdoing. Companies must have a clear communication channel for employees to report potential fraud internally and feel comfortable about it being handled internally, rather than taking their concerns directly to the government whenever their is any perceived issue. Many potential fraud activities can be prevented internally, without government involvement, if the correct compliance procedures and culture are in place.
With an almost 20% increase in the number of retaliation suits filed by internal whisteblowers in the past three years, the number of cases that are actually concluded has remained flat. This means that more whistleblowers are remaining on the job, and companies will have to deal with the reality of maintaining anonymity and dealing with that employee fairly, while at the same time investigating the original claims.
Preventing potential wrongdoing before it actually occurs is crucial to protecting a company’s reputation and to preventing the costs and resources that must be devoted when a fraud case is brought by the government or when an internal whistleblower files a retaliation suit. Guidepost Solutions has the expertise to help companies implement a compliance program that encourages a culture of compliance within the company.