Rewarding whistleblowers: Arguments for and against

In what is by far the largest whistleblower bounty under the Dodd-Frank Act’s whistleblower provisions, the US Securities and Exchange Commission (SEC) on 22 September 2014 awarded more than US$30 million to a whistleblower who provided information that culminated in a successful SEC enforcement action. In the SEC’s order, the names of the company involved and the award recipient were redacted to protect the whistleblower’s identity.

Section 922 of the Dodd-Frank Act envisages paying awards to whistleblowers who provide the SEC with original details about a securities law violation that leads to a successful SEC enforcement action resulting in monetary sanctions over US$1 million. The award may range from 10% to 30% of the amount recovered in the enforcement action.

The section also protects whistleblowers from retaliation by ensuring that the SEC maintains the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. The Dodd-Frank Act defines whistleblower to include “any person”, implying that anyone from the general public having crucial information about a possible securities law violation may approach the regulator and supply information.

Suhail Nathani is a partner and Yogesh Chande is an associate partner at Economic Laws Practice. Malek-ul-Ashtar Shipchandler, a trainee, assisted with research. This article is intended for informational purposes and does not constitute a legal opinion or advice.