HedgeCo.net News -Based on the new Dodd-Frank Act that was just signed into law last week by President Obama, new legislation allows the SEC to award huge sums to whistleblowers in insider-trading cases such as the one against hedge fund Pequot Capital Management.
“As of this past Friday, the SEC now has greater ability to extract information from employees of corporations and others involved with those employees.” Ed Tomko, head of the White Collar Crime practice at Curran Tomko Tarski, announced.
On Friday, a payment was made by the SEC to Karen and Glen Kaiser who provided documents that helped the SEC build its case against Arthur J. Samberg, founder of the Pequot hedge fund and David E. Zilkha, a former Microsoft employee.
“This has broad reaching implications for public companies as well as businesses operating in the financial sectors,” said Tomko. “This is the largest amount awarded by the SEC to whistleblowers in an insider-trading case.”
As a result, there is the potential now for whistleblowers to be enticed by lucrative fees they will receive for providing information to the government. This can become a slippery slope for businesses. This can now provide possibly a powerful incentive for an employee or individual related to an employee who know of a securities violation to contact the SEC and provide information that may lead to a large payment in exchange for the information.