Corporate Snitching to SEC Surges as Telework Emboldens Tipsters
(Bloomberg) -- Wall Street’s main regulator received more tips on corporate wrongdoing than ever before as employees became more confident to report on misdeeds after working away from the office for more than a year.
The U.S. Securities and Exchange Commission received more than 12,000 whistle-blower tips in the fiscal year that ended on Sept. 30, almost double the previous record set last year, according to the agency’s annual whistle-blower report published Monday. The jump in tips coincides with much of corporate America working from home during the pandemic.
Being away from the office has led workers to question how dedicated they are to their employers, according to academics and whistle-blower attorneys. Tipsters can more easily report on their colleagues’ activities without worrying whether co-workers are peering over their shoulders or that their managers are tracking their actions.
“People feel safer at home to collect and report wrongdoing,” said Jordan Thomas, a former SEC official who helped set up the agency’s whistle-blower program a decade ago. “No one is watching them take pictures of their computer and no one knows they’re recording a conference call with their phone.”
Also luring informants is the potential for a massive payout. The SEC awarded about $564 million to 108 individuals, including granting one tipster $114 million for information that led to a successful enforcement action. The watchdog gave out more awards last year than in all prior years combined, according to the report.
Under the SEC program, which was established as part of the 2010 Dodd-Frank Act in the wake of the financial crisis, tipsters can receive financial awards if they voluntarily provide unique information that results in an enforcement action. Payouts can range from 10% to 30% of the money collected in cases where sanctions exceed $1 million. Awards are paid via a fund set up by Congress -- not money owed to harmed investors.
©2021 Bloomberg L.P.