Today's CPA - 6

ACCOUNTING & AUDITING
procedure is intended to streamline
the resolution of contented decisions
on straightforward denials.
The primary focus of the revisions
concerns the monetary awards
whistleblowers can receive when
financial remedies are assessed
for a violation. Currently, the SEC
is authorized to make monetary
awards to individuals who provide
original information that results in
financial remedies in excess of $1
million.
The proposal would make the
following revisions.
Awards would be allowed for
settlements reached through a
deferred prosecution agreement
or non-prosecution agreement
entered into by the Department of
Justice or a state attorney general.
It would also allow for awards where
a settlement agreement is reached
by the SEC outside of a judicial or
administrative proceeding. This is
intended to prevent whistleblowers
from being denied awards based on
the forum for reaching settlement
with the wrongdoer.

The flexibility to increase an award
is intended to give the SEC the
ability to adequately incentivize
whistleblowers who otherwise
might not deem the reward material
enough to justify the inherent risk in
reporting.
Likewise, the proposal would also
establish a discretionary mechanism
to make awards in cases that do
not currently meet the $1 million

Of the total amount awarded to date, 40% of the
aggregate has been paid in just three awards
and several individuals have received awards in
excess of $20 million.
threshold for covered action,
are based on publicly available
information or where monetary
sanctions collected are de minimis.
Currently, no award is allowed under
these circumstances.

Another revision would allow the
SEC to adjust upward smaller
awards to the extent that the award

Of the total amount awarded to
date, 40% of the aggregate has
been paid in just
three awards
and several
individuals have
received awards
Awards are made equal to 10% to 30% of the
in excess of $20
million. With the
remedy and are sourced from the Investor
statutory cap for
Protection Fund established by Congress.
an award at 30%
Since the inception of the program, the SEC
of the financial
has awarded more than $300 million to over
remedy and no
dollar limit as a
50 individuals, with the largest award to a
ceiling, awards
single individual totaling $50 million.
can quickly mount
up.

Investor Protection Fund

does not exceed the 30% statutory
cap. Over 60% of awards to date
have been for less than $2 million.
6 Texas Society of CPAs

excess of an amount necessary to
fairly compensate whistleblowers
without providing windfalls that
unfairly burden damaged parties
or taxpayers. Discretion would only
be applied to awards in excess of
$30 million (financial remedies in
excess of $100 million) and would
still be subject to the minimum 10%
award provided in the statute. The
amendment would also provide for
discretion when it is determined

The proposal gives the SEC
discretion to reduce very large
awards that are considered well in

that the whistleblower's report
qualifies for awards under multiple
programs.
Some groups are concerned that
these revisions will discourage
reporting by individuals within
organizations who fear reprisals
and may not be knowledgeable
with regard to the procedures that
must be observed to qualify for
whistleblower protections. Others
argue that changes are needed to
give the SEC flexibility to encourage
reporting while at the same time
being accountable to taxpayers and
injured parties.
If enacted, only time will tell how
these changes will play out.

ABOUT THE AUTHOR:
Don Carpenter is clinical professor
of accounting at Baylor University.
Contact him at Don_Carpenter@
baylor.edu.



Today's CPA

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Accounting and Auditing
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