The SEC is about to get reinforcements in its fight against white-collar crime: employees with inside knowledge of misdeeds. On May 25, the SEC adopted bold new rules that will provide whistleblowers with major incentives to report corporate frauds and other financial crimes.
The new rules were mandated as part of Dodd-Frank, and show the long reach of that historic law. Whistleblower programs -- which provide huge cash rewards to employees who can document corporate wrongdoing -- have been successful in other sectors, such as pharmaceuticals and healthcare, in providing government prosecutors with enough evidence to impose penalties on corporations for major wrongdoing. Bringing this tool to the financial sector is long overdue.
Needless to say, Wall Street hates the new whistleblower rules. The Business Roundtable blasted the rules saying they don't provide companies with the opportunity to "self-regulate and self-correct." "Our member companies, as well as other regulated public companies, have devoted substantial resources to establishing a culture of compliance and integrity within their organizations."
I'm all for self-regulation -- when it works. But obviously it hasn't in the financial sector, which is why the government is stepping in.
