Securities and Exchange Commission Has New Plans to Catch Investment Scammers

According to the Los Angeles Times, Robert Khuzami, the Securities and Exchange Commission’s (SEC) director of enforcement, has initiated a new whistle-blower program to attempt to catch fraudsters in the act. This program hopes to stop the fraudster before they have caused too much damage and to attempt to seize the most assets possible for returning to victims.

In exchange for coming forward and cooperating with the SEC, the SEC will provide levels of protection to individuals who were involved in the scheme but now wish to turn in their co-conspirators or the individual running the scheme. The whistle-blower may even avoid an SEC suit as a result of their cooperation with the SEC. Further, there is a proposal to even provide the whistle-blower with a reward, a percentage of what is recovered, for coming forward and providing key information which leads to the prosecution of individuals like Madoff.

Although rewarding wrongdoers, who become whistleblowers, may seem distasteful, unfortunately this may be extremely important in the efforts to bring down powerful fraudsters and their schemes. The protection from a lawsuit and monetary reward, encourages individuals to come forward, when likely they would not otherwise. Further, as Khuzami pointed out “cooperator’s testimony allows [the SEC] to act more quickly — find out where the bank accounts are located and increase our chance of returning money to investors.” Finally, Khuzami reminded us that “the earlier you shut down a case, the less victims there are. Tomorrow’s victims will not materialize.”

The IRS initiated a similar whistle-blower provision four years ago, which has apparently significantly increased the number of multimillion-dollar prosecutions of individuals who cheat the tax system.

Another way to stop a scam is for the victims to come forward when they suspect a fraud. If you believe that you may be a victim of an investment scheme, contact our office for a free consultation regarding your legal rights and possible means to recover losses. Please also visit our website www.dossfirm.com.