A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct.
In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.
In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior each year.
Whistleblowers are a necessary force in the fight against corruption, scams, fraud, and other forms of manipulation that can affect all levels of financial systems.
The methods by which whistleblowers may bring allegations to light vary.
This includes contacting a third-party outside of an accused organization such as the media, government, law enforcement, or those who are concerned.
Whistleblowers assume a large amount of risk with such disclosures, often facing stiff reprisal and retaliation from those who are accused or alleged of wrongdoing.
In order to safeguard the identity and well-being of whistleblowers, the United States’ Securities and Exchange Commission (SEC) has installed an entire division towards these individuals.
As of May 2020, the SEC has awarded over $396 million to 77 individuals since issuing its first award in 2012.
All payments have been made out of an investor protection fund established by the US Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.
Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.