International - Written by on Sunday, November 27, 2011 10:40 - 0 Comments

UK whistleblowers cash in on US Dodd Frank bounty program providing windfall for UK investigators

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The UK and China top the list of non US whistleblowers accounting for nearly 30% each in the first report published by the US Securities and Exchange Commission this month.

The sample so far is small – the program only began in July and the report is through September 30.  However, the UK provided 9 whistleblowers, China 10.  These numbers dwarf reports from other non-US countries.

Under the Dodd Frank Act the SEC will pay a bounty to whistleblowers who voluntarily provide original information that leads to successful SEC enforcement actions (which include US Foreign Corrupt Practices Act violations) resulting in the imposition of monetary sanctions over $1,000,000.  We wrote some time ago predicting that the new law will produce an increase in reporting.

UK whistleblowers will have been tempted by the prospect of a minimum reward of 10% up to a maximum of 30% of the penalties collected by the SEC.  The program has been dubbed by some as “SFO Confidential – on steroids”

With telephone number penalties routinely ordered by the SEC the bounty program is a massive incentive to employees to whistleblow on their employers – and sits uneasily with firms own whistleblower hotlines.  Why whistle-blow internally when massive payouts are on offer under the SEC scheme?  Requests that payouts only be made if employees complaints were not dealt with under internal firm processes were rejected by the SEC.

The Dodd Frank whistleblower provisions have received relatively little coverage in the UK.

However, this report highlights that UK companies should not assume that they are immune from the impact of the new US rules.

The ripples of a report made to the SEC involving a UK whistleblower are likely to be felt in the UK in more ways than instant wealth for the whistleblower if their claim is accepted.

Reports will almost certainly be fed back to UK prosecuting authorities and regulators and be a catalyst for a parallel UK investigation.


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