I have the greatest admiration for whistleblowers. People like Sherron Watkins (she reported Enron's accounting fraud), Jeffrey Wigand (he went public with Brown and Williamson's cigarette deceptions) and Bunny Greenhouse (she called out Halliburton's contract abuses during the Iraq War) are bonafide heroes. We need more such people spotlighting unethical business practices and reminding the rest of us that having moral courage is crucial, even though it can hurt your career.
So imagine my delight when I learned the SEC is creating the new whistle-blower award program mandated by the Dodd-Frank Act. What's more, it recently created a $452 million investor protection fund to pay for whistle-blower awards. How will this work? Apparently, citizens who report "new" information about securities fraud they've witnessed can earn 10 percent to 30 percent of monetary sanctions paid to the commission.
These sanctions must be worth at least $10 million. Therefore, whistle-blowers will earn, at a minimum, $1 million to $3 million. That's serious money, folks. But what does this mean for the average financial advisor? If you run your own practice, you probably don't encounter many, if any, instances of securities fraud. If you work for a large financial-services company, it's hard to uncover accounting fraud from the field. What you can do: Identify disconnects between ethics and action in your own work, then blow the whistle on yourself.
