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SEC considers limiting whistleblowing payouts

On Behalf of | Jul 7, 2018 | Whistleblowing |

Wisconsin employees who risk their employment, reputation and financial security to raise the alarm on wrongful or discriminatory business practices do so for one reason — it is the right thing to do. Unfortunately, doing the right thing does not pay the bills, and many whistleblowers seek compensation for their injustices. But payouts for successful securities fraud whistleblowing from one entity could soon be much less than in the past.

In March 2018, the Securities and Exchange Commission paid $83 million to three whistleblowers. Two of them took home approximately $25 million each while the other received $33 million. The three whistleblowers provided valuable tips regarding Merrill Lynch, which helped the SEC move forward with action against the company.

That was the biggest whistleblower payout in the SEC’s history, which has some concerned that payments are getting somewhat out of hand. A new rule is being considered, which would allow the SEC to reduce a person’s award if it believes the payout is too big. It is not clear how it will determine what constitutes an award that is too much or if there will be any chance to appeal the decision.

Not everyone shares this sentiment, though. Limits do not currently exist for whistleblowers reporting on qui tam recoveries or tax fraud, and one expert is worried that there might be ulterior motives for limiting awards. Opponents of the proposed rule are concerned that it could discourage whistleblowers from coming forward.

Wisconsin whistleblowers understand just how important financial compensation can be. Whether faced with retaliation or wrongful discrimination, a person’s financial stability can be compromised swiftly in the face of whistleblowing. However, most individuals can seek just compensation from their former employers, which can address these difficult issues.