SEC Investigator Asks for Bigger Bounty Program to Detect Fraud
By Ian Katz for Bloomberg, July 2 2009
Rules permitting payment for tips on insider trading should be amended to let the agency “award a bounty” for information leading to fines for any securities violations, Inspector General H. David Kotz said in a letter released today by U.S. Representative Paul Kanjorski. Kotz wrote in response to a request for proposals from Kanjorski, who leads a House Financial Services panel that oversees capital markets.
“We would recommend that the Exchange Act be amended to authorize the SEC to award a bounty for information leading to the recovery of a civil penalty from any violator of the federal securities laws,” Kotz wrote in a letter dated yesterday. “The statute should also require that the whistleblower be provided with status reports at certain milestones during the investigation or examination that was based on the tip.”
Kotz is probing the SEC’s failure to detect Madoff’s Ponzi scheme, including claims by former money manager Harry Markopolos that the agency didn’t act on his tips about the fraud. Kanjorski, a Pennsylvania Democrat, had written two letters seeking information on Kotz’s investigations, which have not been completed.
The inspector general also said he supports letting the Public Company Accounting Oversight Board inspect the auditors of broker-dealers and money managers such as Madoff’s closely held firm. Kanjorski introduced legislation in February that would expand the authority of the Washington-based PCAOB, which now inspects only the auditors of publicly traded companies.
Comments