Will the SEC’s Whistleblower Bounty Change Employer/Employee Relationships?

November 2011Articles HCCA Compliance Today

Under regulations that took effect on August 12, 2011, the Securities and Exchange Commission (SEC) has given itself a new weapon to combat corporate fraud. In essence, whistleblowing employees in many different corporate environments have an incentive to notify the SEC of compliance issues—even if those employees have not utilized internal reporting systems—and earn themselves a huge reward. The scope of the regulations is breathtaking. For example, if a publicly traded pharmaceutical company is illegally practicing off-label promotion of its products, a whistleblower who advises the SEC of this activity can receive up to 30% of a subsequent settlement of the allegations. Similarly, a private entity providing illegal kickbacks might, if it seeks to raise capital under certain Securities Act provisions, and itself subject to rules that protect a whistleblower from retaliation.

With settlements in many fields—be it pharmaceuticals, health care, or even violations of good manufacturing practices in the food and drug industry— exceeding hundreds of millions of dollars, and often billions, the impact of the new SEC rules will be immediate.

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