n-Financial Theology: Some Precise Notation, Notes 15c - Whistleblower Incentives and Protection

15. Morphisms between Mega-States (continued)

c, Whistleblower Incentives and Protection under the Dodd-Frank Act 2010

Have you been able to draw the morphism?

You have of course four choices. Referring to Note 10, the four Mega-States are:

(1) [I][I]
(2) [I][B]
(3) [B][B]
(4) [B][I]

And the four morphisms between mega-states in the free functor direction (that is, in the direction of increasingly simplified structures of financial transactions) is:

(a) (1)->(2)
(b) (2)->(3)
(c) (3)->(4)
(d) (4)->(1)

In Note 15(a), we showed the Orderly Liquidation Authority (OLA) as the morphism from (2) to (3). The OLA is in a strong sense a catalyser and condenses more bailout to bailout situations.

In contrast, WIP if we were to guess, catalyses and compresses the bailout to innovation mega-state [B][I] to [I][I], that is, it is a (d) morphism.

You might ask why is WIP not (a), (b) or (c)? And why should it be (c)?

WIP is not (a) because it does not is unlikely to cause a bailout. It is not (b) because it does not enhance or reproduce bailouts.

However, there is an argument that WIP could be (c) because (i) instances of WIP could be initiated from a state of [B] to achieve a state of [I]. In other words, there is nothing logically or empirically impossible for the morphism (c) to eventuate from WIP. But the problem with this view is that WIP starts from a state of bailout, which not the case in fact.

All or almost all conceivable WIP scenarios will start from a state of innovation [I] since the informant will literally need to file original information with the SEC and/or the CFTC in order to qualify for the entitlement of a minimum of 10% and up to 30% upon discretion of the authorities of any and all recoveries from whatever legal actions and settlements over $1 million. The characteristic of this state is one of innovative private contracts, where even the government s prone to act as an initiator of bounty-hunting and qui tam in an incentive-based market system.

Therefore, given this market orientation of WIP, it exists as an element in the domain of many possible financial instruments. Thus, it helps seed and proliferate more and more financial innovation. Here, we mention, for instance the potential establishment of litigation funds, new directors' liability insurance, as well as indexes which could inform investors precisely on potential corporate liabilities.