New York state is joining the trend in offering financial rewards to prospective whistleblowers who expose wrongdoing in the financial sector.
State attorney general Eric Schneiderman announced Thursday that he will propose legislation, the Financial Frauds Whistleblower Act, designed to protect and reward employees who report information about illegal activity in the banking, insurance, securities, and financial services industries.
Much like the U.S. Securities and Exchange Commisison’s (SEC) whistleblower program, the proposed new law would provide financial compensation to whistleblowers who voluntarily report fraud in their industry, and whose tips lead to more than US$1 million in penalties or settlement proceeds. Rewards would be between 10% and 30% of the monetary sanctions, and would be paid out the funds recovered by the attorney general’s office. The bill would also guarantee the confidentiality of the whistleblower’s information, and make it illegal for any employer to retaliate against an employee that reports misconduct.
The Ontario Securities Commission (OSC) recently proposed its own new whistleblower reward program, which would also reward reporting of misconduct that leads to significant monetary sanctions. That program, which has only been proposed for comment and not yet implemented, aims to encourage reporting of information that would otherwise be difficult for regulators to uncover.
The attorney general’s office indicates that its program has a similar goal. It says that providing incentives and protections for people to report financial frauds “is essential for detecting and prosecuting a wide array of financial frauds.” The law would also create a program within the state’s Department of Financial Services to reward whistleblowers for tips to that agency.
“New York has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes. This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets,” said Schneiderman.