US regulator says ‘pay UK whistleblowers’
Whistleblowers in the UK need to receive anonymity as well as a monetary reward to encourage them to report corporate corruption or securities violations, Jordan Thomas, former assistant director at the SEC, says.
In an interview with FTAdviser, Mr Thomas pointed out that although the US and UK have different regulatory approaches, “law enforcement authorities in both rely heavily on actionable intelligence”.
Mr Thomas, who now chairs the whistleblower practice at US law firm Labaton Sucharow, said: “Historically, employment protections alone have been insufficient to get corporate whistleblowers to break their silence about possible securities violations.
“Congress recognised this fundamental problem when it established the SEC Whistleblower Program by mandating that the SEC also provide potential whistleblowers with the ability to file anonymously and receive significant monetary awards.
“SFO Confidential is a positive and necessary first step for UK regulators.”
In July 2010, a law was passed in the US that enabled whistleblowers to come forward anonymously and to receive a monetary reward, following a re-evaluation of how the US enforced securities law post the economic crisis.
Mr Thomas said: “Following the US re-evaluation, regulators found that for people who were aware of corporate corruption or securities violations, there wasn’t enough to incentivise them to come forward.
“There were worries they would lose their jobs and would not be able to get another. I had a leadership role in developing the legislation and the implementing rules and what we discovered is that we needed to allow people to report security violations anonymously.”
In addition, the US regulator also offers whistleblowers a monetary reward of between 10 to 30 per cent of the monetary sanction collected by the SEC.
Mr Thomas said: “In the last two years alone, the SEC had monetary sanctions that exceeded $2.8bn and in many cases had monetary sanctions in excess of £100m.
“Whistleblowers are eligible for monetary awards related to enforcement action so if the SEC brings a case, the Department of Justice brings a case and Finra brings a case, whistleblowers are entitled to 10 to 30 per cent of each of those monetary sanctions.
“Whistleblowers provide tips that will lead to far bigger monetary sanctions.”
According to Mr Thomas, there are two kinds of whistleblowers - those who have are insiders and those that look at market analysis.
He said: “There are many people who analyse markets regularly and can spot security violations. After the Madoff scandal, there were many credible reports by individuals stating that they knew what was going on but they were afraid to report it.
“Part of that was due to the culture of the financial services industry but secondly, no mechanism to communicate this and there was no incentive.
“Some people want to do the right thing but not at the expense of their family and for those anonymity is helpful and there are others who are motivated by money.”