The Bank is Open: SEC Investor Protection Fund Poised to Pay Whistleblower Bounties
Lane Powell Shareholders Doug Greene and Michelle Peterson authored an article in Seattle Business magazine’s September 2012 issue titled “The Bank is Open: SEC Investor Protection Fund Poised to Pay Whistleblower Bounties.” In the article, Greene and Peterson discussed the Dodd-Frank Wall Street Reform and Consumer Protection Act and its effect on Washington businesses and the U.S. Securities and Exchange Commission.
The Dodd-Frank Wall Street Reform and Consumer Protection Act directs the U.S. Securities and Exchange Commission (“SEC”) to make monetary awards (“bounties”) to individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions of more than $1 million. With awards in the range of 10 percent to 30 percent of the monetary sanction, the bounty for the employee can be significant, especially in light of recent SEC enforcement actions netting penalties well into the tens of millions of dollars. For example, the first round of SEC’s Notices of Covered Actions (the mechanism by which the SEC notifies whistleblowers when to submit their claim for a bounty) references the judgment that led to the subsequent monetary penalty against Raj Rajaratnam in the amount of $92.8 million. An original source in a case such as Rajaratnam has the potential to receive up to 30 percent of the SEC’s penalty.