A new report by the Securities and Exchange Commission (SEC) inspector general recommended that its whistleblower reward program be overhauled.
Under the program, which began in 1989 and is limited to insider trading cases, only a total of $159,537 has been paid to five people. According to the report, Bernie Madoff’s multibillion-dollar fraud went undetected for 16 years because of the mismanagement of the program, despite the SEC having received six “substantive complaints that raised significant red flags” about his operations.
The Enforcement Director of the SEC has agreed with all the report’s recommendations, which included fixing the application process, enacting better procedures for determining the merit of an application, and improving communication with the public about the plan.
The SEC recently asked lawmakers to expand its whistleblower award authority to any case that results in recouping fines of over $1 million. The House and Senate are considering the proposal. The SEC Chairman said in testimony:
“Right now, the main reward for being a whistleblower is the good feeling you get of having done something important, because (the SEC doesn’t) have the authority to pay except where the whistleblowing relates to insider trading.”