Whistleblowing Bounties: Are Informants Getting Paid?

The stock market booms and bursts of the 1980s, rife with insider trading and other financial impropriety led to development of incentives and bounties for coming forward with information about such illegal activity. However, the New York Times reports that in the twenty-plus years since these rules were introduced less than $160,000 has been paid out to whistle-blowers. This pittance is the result of leaving the decision to give awards out to regulators who are often reluctant to levy fines against companies or pay out the so-called bounty.

Now, Congress is looking at recent fraudulent activity in the securities sector and is proposing an overhaul of the reward system for reporting illegal behavior. The new rules would require a payment whenever there are penalties in excess of $1 million dollars against a company or entity.

Naturally, businesses and trade groups are lining up against the measures. Opponents of the law say that it unfairly incentives the digging of dirt against a company, and hinders the ability of the company to actively comply with and fix any violations. Advocates for the change say that whistle-blowers have traditionally been overlooked and under-compensated, and that coming forward with such information has the effect of ruining careers and making employees miserable. Thus, they deserve a greater share of compensation for both the information, and the ultimate effect it has on their lives and careers.

You can read more on the history of rewards and financial regulation on the New York Times here.