Securities regulators have endorsed model legislation designed to extend adoption of whistleblower programs that pay financial rewards for enforcement tips to more jurisdictions.

Members of the North American Securities Administrators Association (NASAA) voted to adopt a model act based on the regime developed by the U.S. Securities and Exchange Commission (SEC), which pays financial rewards for tips that lead to successful enforcement action.

To date, more than US$510 million has been paid out under the SEC’s program, which has in turn generated over US$2 billion in financial remedies.

In Canada, the Ontario Securities Commission (OSC) remains the only regulator that pays rewards for enforcement tips.

The NASAA Model Whistleblower Award and Protection Act includes provisions to enable state regulators to make monetary awards to whistleblowers (up to 30% of the amount recovered in an enforcement action), along with measures to protect the identity of whistleblowers and prohibit retaliation by employers.

“Through this model act, we hope to encourage individuals with knowledge of potential securities law violations to report it to state regulators in the interest of investor protection,” said Christopher Gerold, president of NASAA and chief of the New Jersey Bureau of Securities.

“Providing a safe environment for whistleblowers to come forward can lead to the earlier detection of securities law violations, which, in turn, provides regulators with greater opportunities to prevent harm to additional investors by disrupting alleged misconduct sooner,” Gerold added.