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SEC probes companies' treatment of whistleblowers

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(Reuters) - The U.S. Securities and Exchange Commission has sent letters to several companies asking for years of nondisclosure agreements, employment contracts and other documents to investigate whether companies are muzzling corporate whistleblowers, the Wall Street Journal reported.

The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers, the newspaper said.

It couldn't be determined how many or which companies were sent the letters or what penalties the SEC could potentially levy in the probe, the Journal said.

Reuters could not immediately reach the SEC for comment.

The 2010 Dodd-Frank Wall Street reform law gave the SEC the power to start a whistleblower program that lets the agency reward people who report misconduct, if that tip leads to the collection of more than $1 million in monetary sanctions.

Last year, the SEC received more than 3,500 tips from whistleblowers, the largest number received since the program went into effect three years ago.

There is growing momentum for other programs similar to the SEC's.

New York's Attorney General Eric Schneiderman is expected to propose legislation on Thursday to protect and reward employees who report information about illegal activity in the banking, insurance, and financial services industries.

Mr. Schneiderman's bill, called the Financial Frauds Whistleblower Act, provides for financial compensation for whistleblowers who voluntarily report fraud in their industry and whose tips lead to more than $1 million in penalties or settlement proceeds.

Last September, U.S. Attorney General Eric Holder called for Congress to take steps to help prosecutors build criminal cases against senior Wall Street executives, saying companies often insulated their leaders from responsibility for misconduct.

He called on Congress to boost rewards for Wall Street whistleblowers and fund more FBI agents with forensic accounting expertise.