Whistleblowers play a big role in highlighting impropriety and protecting markets and investors. Newly proposed legislation would strengthen protections for those who call attention to Securities and Exchange Commission violations. Research shows that, during the fiscal year 2022, whistleblowers called attention to more than 12,300 securities law violations.
Per CFO Dive, five senators have cosponsored a bipartisan bill that, if passed, would enhance protections for SEC whistleblowers. The senators arguing in favor of the bill assert that strengthening whistleblower protections would help support a culture of transparency, which would make investors feel more confident.
How whistleblowers currently benefit
When a whistleblower exposes wrongdoing and the government imposes sanctions against the responsible party, the whistleblower typically gets an award that falls somewhere between 10% and 30% of the sanctions the government imposed. In 2022, the SEC paid out $229 million in whistleblower awards to whistleblowers who reported fraud, manipulation and other offenses.
What the proposed bill would do
If the proposed bipartisan bill passes, it would make it easier for whistleblowers to collect awards owed to them by setting a timeline for them to do so. The bill would make it so the whistleblower must receive his or her award within either one year since filing the claim for the award or within one year of associated litigation concluding – whichever date is later. The new legislation would also stipulate that whistleblowers may not waive their rights via a pre-dispute arbitration agreement.
So far, whistleblower tips have resulted in $6.3 billion in sanctions, with about $1.5 billion going back to investors.