More than three-quarters of corporate board members in a new survey said their main concern with the SEC’s new whistleblower rewards is the negative impact of an increase in false allegations.

The survey, by accounting and consulting firm BDO USA, found that 40 percent of the 101 corporate board members in the survey cited the damage that false allegations could have on a business’s reputation, while another 38 percent cited the cost, in both dollars and time, of responding to false allegations. Fifteen percent of the survey respondents cited the potential negative impact to their companies’ own internal whistleblower programs they have previously established.

Last month, the SEC opened its new whistleblower program where people could report violations of federal securities laws and apply for financial awards (see SEC’s New Whistleblower Program Takes Effect). The program, which was enacted as part of the Dodd-Frank Wall Street Reform Act, provides for financial awards if the whistleblower’s tip leads to a successful SEC enforcement action with more than $1 million in monetary sanctions.

Two-thirds of the board members surveyed by BDO said they do not feel the whistleblower bounties undermined the internal anti-fraud and compliance programs mandated by previous legislation.  However, a similar amount (68 percent) of directors said they are in favor of legislation that would require whistleblowers to report their complaints internally in order to collect any reward from the SEC.

"The new Dodd-Frank whistleblower rules, which became effective last month, present several challenges to our corporate clients," said BDO Consulting partner Glenn Pomerantz in a statement. "Whistleblower hotlines have been a strong tool for fighting fraud and a weakening of this mechanism would be unwelcome news for directors. It’s refreshing to see that directors do not anticipate bounties undermining anti-fraud compliance programs. The feelings among compliance professionals have certainly been mixed on this issue. It is certainly understandable why directors support a mandate for whistleblowers to use internal programs prior to alerting the SEC.”