The SEC Whistleblower Program came into being following the US Stock Market Crash of 2008-09. Here is a brief back- story that led to the Program. The crash of 2008-09 lopped off $7 trillion of household wealth. There was an enormous outcry at the way banks and mortgage institutions had defrauded investors and pension funds. They had written mortgages at sub prime rates, often without investigating the background of clients, their earnings and whether they even had a job. The rating agencies colluded in the process by giving them an A or AA rating. To unload this junk the banks and mortgage institutions packaged these mortgages into what were called Collateralized Debt Obligations or CDOs and sold them to investors and pension funds. The whole thing blew up when there were no bids to buy and the market froze. The crash followed. The banks were bailed out with the enactment of TARP using taxpayer money. The Federal Reserve started printing money and buying bonds and mortgage backed securities from banks and mortgage lenders. All toll, the Federal Reserve bought $4.3 trillion of this stuff, some of it at FACE VALUE.
When investors and pension funds found out that they had been duped, they cried out for regulations to recoup their losses. The result was the Dodd-Frank Wall Street Reform and Consumer Protection Act. A section of this Act was devoted to the Whistleblower Program. This program outlines specific guidelines that enable Whistleblowers to come forward, to protect their identity and to prevent retaliations from their employers.
The rules of the program state that the “Securities and Exchange Commission (SEC) will pay 10% to 30% of the monetary sanctions collected as a result of successful enforcement action or actions in which the sanctions exceed $1 million.”
In cases where the sanctions exceed $1 million, a Whistleblower may collect additional monetary rewards from other regulatory or enforcement agencies.
Under the program the Whistleblower is protected. His/her identity can remain anonymous if represented by a SEC Whistleblower attorney. He/she is not required to provide persons identifying information or the names of possible security violations. Information given to the SEC can be by telephone, email or electronic submission through the website. Whistleblowers are protected from retaliation from their employer.
The highest Whistleblower payment was for $30 million on September 2014. The most recent payment was for $17 million, the second highest. All toll the SEC awarded $85 million to 32 Whistleblowers.