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SEC Whistleblower Awards Have Little Effect on Internal Tips

Most companies have seen no change in volume on hotlines, IIA survey shows.

By Susan Kelly | Updated on December 04, 2012
whistleblowerThe Securities and Exchange Commission’s awards for corporate whistleblowers haven’t had much impact on the tips that companies receive via their internal hotlines, according to a recent survey by the Institute of Internal Auditors.

In August 2011, the SEC started a program, mandated by Dodd-Frank, which awards whistleblowers from 10% to 30% of any financial recovery the agency makes as the result of information the whistleblower provided. Companies fretted that the prospect of an award might cause employees to bypass internal procedures for reporting fraud and other problems and instead head straight to the SEC.

But 84% of the IIA’s respondents say they’ve seen no change in the number of tips or complaints received by their hotlines since the SEC award program took effect in August 2011, with 11% saying volume has increased and 5% citing a decrease.

When the SEC kicked off its awards, “there was a lot of concern that there was going to be some sort of chaos out there because people might be lured by the attractiveness of the reward money from the SEC and that was going to cause people to go around corporate processes to investigate allegations of fraud,” says IIA CEO Richard Chambers. “The survey results would indicate that at least so far, that’s not proving to be true.”

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