Jul 26, 2010

"The Dodd-Frank Act, which just became law, strengthens the authority of the Securities and Exchange Commission to regulate complex securities, like credit default swaps, and broadens oversight of hedge funds that control billions of dollars of assets.  One provision of the law that is likely to give a significant push toward revealing more conventional types of securities fraud authorizes the S.E.C. to pay out financial rewards to whistle-blowers that could total millions of dollars.

Rewarding whistle-blowers is an important means for agencies like the Internal Revenue Service to generate information about continuing violations that might not come to light otherwise. The Dodd-Frank Act opens a new avenue for the S.E.C. to gather information for any violation of the federal securities laws, not just insider trading.

Until the Dodd-Frank Act was enacted, the S.E.C. could only provide a whistle-blower award for information about insider trading. Until last week, only seven payments, totaling about $160,000, had been made for information about insider trading. It is not surprising that the program was only a modest success because insider trading tends to involve a limited circle of people who usually trade on the information rather than disclosing possible wrongdoing to the S.E.C."

Click to go to The New York Times website and read the entire article.