On Wall Street, Whistleblowers Will Be Able to Be Paid Even More by the SEC.
The SEC just ended restrictions dating back to the Donald Trump era.
The difference in mentality between Europe and America can be seen on many levels. The field of financial markets is no exception. In Europe, there has never been any question of paying whistleblowers. Politicians believe that this would encourage a society of denunciation.
On Wall Street, they think the opposite: the SEC (Securities and Exchange Commission) is convinced that the higher the rewards, the less incentive there is to commit fraud, and the better investors are protected.
The philosophy is opposite between Europe and America, as I said.
Thus, in a single year, since September 2021, the American stock exchange regulator has paid whistleblowers 367 million dollars. This brings to 1.3 billion dollars in the number of rewards paid since 2012. That year, the program came into effect, encouraging witnesses or holders of information to disclose it.
Information that has allowed the SEC to recover 5 billion dollars over the past ten years.
In the future, the amount of money paid out by the SEC could explode. At the end of August 2022, the SEC put an end to certain restrictions that had come into force during the time of its former boss, Jay Clayton. The latter had been appointed under the Donald Trump administration.
Extension of the scope of the SEC
Now the SEC has the right to pay a whistleblower for “related” information, i.e., information that exposes crimes other than financial crime (e.g., tax evasion) and also results in a sanction by another federal agency (such as the U.S. Internal Revenue Service).
“This greatly expands the circumstances under which an individual can receive a reward from the securities regulator,” said current SEC Chairman Gary Gensler, appointed by Joe Biden, in late August 2022. In addition, the SEC loses the power to reduce the amount of the reward if the whistleblower has already received compensation from another agency.
Instead, the SEC gains the power to increase the reward if it determines that the fraud is particularly significant and affects different areas. The rule changes will go into effect within a month. They will apply to any whistleblower claims pending with the SEC on that date, as well as to any claims that are filed thereafter.
Republican commissioners say it will erode SEC's credibility
The new rules are already facing criticism. Now in the minority at the SEC, Republican commissioners have argued that the agency has not properly analyzed the impact of the changes.
Hester Pierce accused the agency, under Gensler, of repeatedly scrapping changes made by his predecessor “when the ink was barely dry on the last set of amendments.” Mark Uyeda, also an SEC commissioner, said such action “risks eroding the regulatory credibility of the securities regulator” and “should be undertaken only after a review of the overall operation of the process. Such a review could also assess the role played by the lawyers who represent whistleblowers on a contingency fee basis and how they present information to the SEC.”
The latter was referring to a new study authored by University of Kansas professor Alexander Platt, indicating that the whistleblower program is now dominated by a handful of law firms and specialists, including some former SEC officials who profit from the system.
Some reading
This Is the Book to Read If You Want to Discover the True Face of the Kremlin Dictator Vladimir Putin. Catherine Belton’s book will help you understand why the West must support Ukraine at all costs.
Putin’s 5 Major Geopolitical Mistakes With His War in Ukraine. Mistakes that will lead Putin to his downfall once the war in Ukraine is lost by Russia.
Focus on the System That Keeps Vladimir Putin and His Oligarchs Afloat in Russia. Anyone who wants to denounce this system risks their life.
4 Billion People by 2100 — The World’s Population Could Be Cut in Half by the End of the Century. This is at least the thesis supported by James Pomeroy, an economist at HSBC.
Who Is the Current Winner of the War in Ukraine? America and It Is the US Dollar That Tells Us So. The impressive strength of the US dollar does not lie.
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