- Date: November 08, 2010
- Source: Admin
The Securities and Exchange Commission (SEC) launched a new whistleblower program to boost their efforts to uncover fraud. This program offers individuals compensation for valuable tips/leads that are considered critical to the agency. The rule comes under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The procedure is clear-cut, mapping out a transparent process for prospective whistleblowers on how to qualify for the award, provide information and stake their claim for the award.
In order to be eligible for an award, the whistleblower must provide the SEC with voluntary information that is original; it should be about a violation of the federal securities laws. Additionally, this should lead to an administrative or federal court action successfully enforced by the SEC. A sanction of $1 million should also be made to the SEC.
The Act expressly prohibits retaliation by employers against individuals who become whistleblowers under SEC rules and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers in violation of the Act.
Background
The Dodd-Frank financial reform bill was passed in July. It contained a whistleblower provision, enabling the SEC to pay 10-30% of a recovery over $1 million to anyone who brings forward original information of fraud.
This brought a wave of discontentment in the industry, especially in pharma companies with many proposing to encourage whistleblowers to give companies a chance to fix the problem first. Another concern was the cashing in of this reward by people designated to investigate or deter fraud. Hence, the proposed rule prevents lawyers, auditors, and internal compliance personnel from making a complaint.
Whistleblowers in the news
The scandal perpetrated by Bernard Madoff, imprisoned former American stockbroker, investment advisor, non-executive chairman of the NASDAQ stock market, is what has been described as the largest Ponzi scheme in history. The warnings from Harry Markopolos (whistleblower) went ignored by the SEC.
9 whistleblowers brought allegations to federal prosecutors against Eli Lilly for marketing Zyprexa, manufactured by the company, illegally. The Food and Drug Administration (FDA) approved Zyprexa for schizophrenia and bipolar disorder. However, in 2001, the company started promotions of the drug for other uses, such as treating anxiety, agitation, and confusion in the elderly.
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