An increase in payouts to informants from the Securities and Exchange Commission is yielding a higher number of people coming forward with tips about potential wrongdoing, The Wall Street Journal reports.
A tip with original information could net a snitch as much as 30 percent of the money the SEC collects from a ne’er do well firm. That means tattling can be worth millions. Previously, the SEC wasn’t necessarily obligated to make any payments even if a tip turned into a big corporate takedown. A new law, however, entitles snitches to at least 10 percent of any payouts netted to the Commission.
The SEC is pretty excited about this. “We’ve gotten some very high-quality tips,” SEC official Stephen Cohen told the Journal. Cohen said the goal was to expedite investigations and nip in the bud the damage wreaked by fraudulent firms.
Meanwhile, lawyers whose job it is to defend companies from the SEC are saying that the new incentives will spur additional frivolous claims against their clients, hampering efficiency.