The Dodd-Frank financial law passed in July provides for the larger bounties, with the hope of fingering wrongdoers such as Bernard Madoff before they swindle thousands of people.

People who supply "original information" about large frauds could net as much as 30% of the penalties and recovered funds collected by the SEC, which could add up to a multimillion-dollar payout.

Lawyers who represent whistle-blowers have been spreading the word about the new incentives.

"We've gotten some very high-quality tips," said SEC official Stephen Cohen.

He said the program aims to get timely information from insiders close to a fraud so the SEC can bring a case quickly, limit the damage and recover funds for victims. "The goal is not just to get more tips; we want to get more high-quality tips," Mr. Cohen said.

Defense lawyers warn that the bounty program could spawn a flood of frivolous cases that create headaches for companies.

Also, the large awards could spur employees to report problems to the government instead of working through normal corporate channels and letting the company self-report any issues, said William Jordan, a corporate defense attorney at Atlanta law firm Alston & Bird LLP.