Back in September 2010, I wondered here whether Section 922 of Dodd-Frank, which specifies that a whistleblower can be any individual who provides information relating to a violation of the securities laws to the Commission (not just an employee of the company in question), might allow for a new industry of "professional whistleblowers." Think Harry Markopolos, for example, who tried to convince the SEC for years that Bernard Madoff was operating a Ponzi scheme.

I wrote at the time that the statute 

appears to open the door to the next generation of operations like Mark Cuban's ShareSleuth, which employed an investigative journalist to look for public companies that appeared to be engaging in financial fraud so that Cuban could sell the company's securities short before the fraud was exposed and the bottom fell out. Instead of selling short (or maybe in addition to selling short), an operation like ShareSleuth could now package up its findings and present them to the SEC for further investigation, in the hopes of receiving a huge whistleblower bounty down the road.

I had not heard much more about this possibility, so yesterday when I moderated a webcast with Sean McKessy and Vince Martinez, the heads of the SEC and CFTC Whistleblower Offices respectively, I asked them if they believed Dodd-Frank allowed for professional whistleblowers. McKessy responded that the statute does include non-employees who submit tips based on their own independent analysis of public information, such as Markopolos. McKessy said that the SEC wants to encourage people who are able to "connect dots in ways that they hadn't been connected before and in ways that our own Enforcement people hadn't done" to participate in the whistleblower program.

Martinez agreed, adding that he hopes that this kind of whistleblower will become a "very prominent part" of the CFTC's whistleblower effort. Martinez said that such whistleblowers are both contemplated and encouraged by the CFTC's rules, and that he hopes to see many of them in the future. 

You can listen to the entire webcast below.

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