The new financial reform act has a provision that rewards whistleblowers, senior employees and third-party informants who provide the SEC with information that results in prosecution. The payouts could be huge. People who provide the SEC with information that leads to a successful enforcement are entitled to receive 10% to 30% of any sanction over $1 million -- including a share of the proceeds from any related regulatory action or shareholders' lawsuit.
Stephen Cohen, an SEC official said: "The scale of awards reflects the high quality of whistleblower we hope to get -- people within a company, broker or other regulated firm that we might not have heard of before."
Similar whistleblowing payments for actions for fraud against the government under the false claims act have generated a multimillion dollar legal business in the healthcare industry.
The SEC claims that it is ready to deal with the increase in cases. Cohen stated: "We already have systems in place which we're improving, for dealing with thousands of tips every year. If this can help us to bring cases more efficiently and quickly, it will make us a more effective regulator."
Do you believe that this new whistleblower program will make Wall Street better?