More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
The Securities and Exchange Commission announced Tuesday that it has awarded more than $14 million to a whistleblower whose information led to an SEC enforcement action that recovered “substantial” investor funds.
The whistleblower program rewards high-quality original information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10% to 30% of the money collected in a case.
“Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips,” said SEC Chair Mary Jo White, in a statement. “We hope an award like this encourages more individuals with information to come forward.”
The SEC says that the whistleblower, who asked for anonymity, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible. “Less than six months after receiving the whistleblower’s tip, the SEC was able to bring an enforcement action against the perpetrators and secure investor funds,” the agency said.
“While it is certainly gratifying to make this significant award payout, the even better news for investors is that whistleblowers are coming forward to assist us in stopping potential fraud in its tracks so that no future investors are harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower, in the same statement. “That ultimately is what the whistleblower program is all about.”
The SEC’s first payment to a whistleblower was made in August 2012 and totaled approximately $50,000. In August and September 2013, more than $25,000 was awarded to three whistleblowers who helped the SEC and the U.S. Department of Justice halt a sham hedge fund, and the ultimate total payout in that case once all sanctions are collected is likely to exceed $125,000.
As the SEC explains, payments to whistleblowers are made from a separate fund previously established by the Dodd-Frank Act and do not come from the agency’s annual appropriations or reduce amounts paid to harmed investors.
Check out SEC Rewards Whistleblowers Who Halted Sham Hedge Fund on ThinkAdvisor.