As the fight against Wall Street fraud heats up, the FBI recently recruited Michael Douglas to star in its public service announcement, urging the public to report insider trading leaks to the authorities. However, this could mean that whistleblowers miss out on a potential reward simply by going to the FBI.
Michael Douglas who played the white-collar villain in Wall Street, famously said in the character of Gordon Gekko that “greed, for lack of a better word, is good”.
While the need for greater financial transparency and an insider trading crackdown can hardly be disputed, reporting fraud to the FBI may not always be the optimal solution.
The Washington Post cites a ‘whistleblower lawyer’ who claims that tipsters who follow Douglas’ advice could be missing out on cash rewards that the government is willing to pay.
Lawyer David K. Colapinto said:
Instead, Colapinto points out that if informants want a reward for financial fraud exposé, they should instead file a claim with the Securities and Exchange Commission.
Under the SEC’s whistleblower program, informants who provide new and timely information about any securities law violation are entitled to financial rewards, provided the information leads to successful SEC enforcement action with more than $1 million in monetary sanctions. Tipsters are entitled to 10 to 30 percent of the money collected by the SEC.
Sean McKessy, Chief of the SEC's Office of the Whistleblower, added:
According to law firm’s Labaton Sucharow’s report, nearly 70 percent of Americans are unaware that the SEC has such an incentive in place – despite that more than one-third of people said they know about misconduct in their own workplace, and more than three-quarters of people said they'd be willing to report it if they were compensated in some way.
In November last year, the Wall Street Journal reported that the first whistleblower claims had been filed, after informants blew the whistle on Bank of New York Mellon and State Street Corp for alleged fraud in currency trades.
Now an employee of Labaton Sucharow, Jordan Thomas, who helped to craft the whistleblower program before leaving the SEC in July, said the quality of the submissions has been high.