Whistleblowers Offered New Incentives to Expose Financial Schemes

After years of neglect, financial whistleblowers may finally see the settlement paydays bestowed upon their fellow exposers from other industries. Here is a recent excerpt from a report from the New York Times:

Congress and financial-market regulators are revamping a reward system for whistle-blowers, offering big payouts for tips about a host of securities and commodity law violations, to be doled out from a new $451 million fund.

The potential rewards are huge. Had the law been in effect, anyone who tipped off the Securities and Exchange Commission to the activities in its recent case against Goldman Sachs, for example, could have raked in $55 million to $165 million.

While corporate exposers, through the False Claims Act, receive a substantial proportion of the settlement fee in exchange for their assistance to the federal government, many of the monetary incentives offered to corporate whistleblowers, even after decades of financial scandals, have been largely absent for those employed for financial firms.

Why now? Clearly there has been a populist uprising against many of the companies who, through neglect, greed or a stunning lack of understanding in regards to their own financial instruments have helped bring about the most recent crisis and recession. Yet, the SEC may still be reeling from the Madoff case in particular, in which they missed obvious signs for nearly three decades that one individual had been responsible for stealing billions. If these measures had been in place, adequate incentives could have stopped his crime spree years ago.