Newspaper article The Christian Science Monitor

Whistle While You Work: Wall Street's Culture of Fingering Fraud

Newspaper article The Christian Science Monitor

Whistle While You Work: Wall Street's Culture of Fingering Fraud

Article excerpt

If you saw financial headlines only like this one on Wednesday - "Five banks plead guilty and pay $5.6 billion in penalties" - you might think Wall Street is a den of thieves. But a new federal program that rewards people who expose financial wrongdoing has revealed a different picture - a hidden culture of extreme honesty in the industry.

Since 2011, the Securities and Exchange Commission has paid out hundreds of millions of dollars to whistle-blowers whose tips to investigators led to fraud convictions. And for the first time this past April, the SEC even gave more than $600,000 to a tipster whose employer, a New York hedge fund, had retaliated against him. That type of compensation may help discourage corporations from trying to gag workers from reporting an internal crime.

As a result of this escalation in rewards, the number of complaints coming into the agency has risen sharply - to more than 10 a day - much to the surprise of regulators.

"The program, while clearly still developing, has proven to be a game changer," says SEC Chair Mary Jo White. "Gone are the days when corporate wrongdoing can be pushed into the dark corners of an organization."

The whistle-blower program is just one reform mandated by the 2010 Dodd-Frank Act, which was passed by Congress after the 2008-09 financial crisis. It was created in part because federal regulators failed to respond to a whistle-blower's complaints about Bernard Madoff's massive Ponzi scheme. While rewarding company whistler- blowers is nothing new - the idea goes back to a 17th-century Dutch ban on short selling - the SEC's success is spawning interest among other financial regulators.

A new survey by the law firm Labaton Sucharow may explain the program's success and the industry's strong culture of integrity, one now more accepting of workers who speak up. In a poll of more than 1,200 financial services professionals in the United States and the United Kingdom, nearly 9 out of 10 said they were willing to report wrongdoing under the kind of protections and incentives offered by the SEC whistle-blower program.

A 2014 global survey of more than 2,500 corporate managers by the international law firm Freshfields Bruckhaus Deringer found similar results. …

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