Personal Finance

Whistleblower law could payout millions for tips on fraud

The Dodd-Frank financial reform bill touched and altered every corner of the financial world, and whistleblowers who uncover corporate malfeasance could benefit from the new rules. Under the law, insiders tipping off the Securities and Exchange Commission will receive a mandatory minimum of 10 percent of settlements and fines exceeding $1 million.

That creates a huge incentive for insiders to reveal the dirty dealings of banks and companies.

For instance, Goldman Sachs recently settled a civil fraud suit brought by the SEC for $550 million. A tipster in such a case could expect to receive a cool $55 million; however, Goldman Sachs did not admit to any of the allegations of fraud.

With the massive bounties, though, could come epic bouts of score-settling and possible distortions of the system. Some observers say that the SEC already receives more information than it can handle - that the key is better enforcement, not more tips.

In the case of Bernie Madoff, whose Ponzi scheme bilked investors of as much as $20 billion, the SEC was repeatedly warned that Madoff's fund and returns raised red flags. In fact, the SEC investigated Madoff's fund several times, finding no evidence, before the scheme imploded in 2008.

However, the new law may embolden a new generation of whistleblowers and bring a new round of financial dirty dealing to light.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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