Know How: Alert

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The SEC Has Discovered Its Whistleblower Program

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The SEC has awarded millions to individuals as a result of its whistleblower program established in 2012.  People who provide the SEC with accurate information that ultimately results in a successful enforcement case could earn a percentage of the amount collected (sometimes in the millions of dollars) by the government thanks to the Dodd-Frank Act.  In addition to creating incentives for whistleblowers, Dodd-Frank shields them from retaliation by allowing them to bring private lawsuits to seek relief for retaliation.    

Some say that these generous benefits may discourage employees from using their companies’ own internal compliance programs, and instead to report directly to the SEC without first alerting the company.  This leaves even companies with strong compliance programs in the unenviable position of being investigated for allegations it hadn’t heard about, with no chance to correct deficiencies, or offer cooperation to the SEC and other investigating authorities.

What can your company do to minimize this risk?  

  1. Have big incentives for employees to report any suspected wrongdoing to your company
  2. Design your corporate compliance program to deal with wrongdoing quickly, openly, and appropriately
  3. Establish a corporate culture of honesty and integrity
  4. Adopt policies that contain clear and simple procedures for safe, anonymous reporting
  5. Have strong anti-retaliation protections so that employees do not have to fear punitive actions by immediate supervisors
  6. Hire a compliance officer to whom employees can report so that the misbehaving supervisor cannot deep six the complaint and cover up the problem
  7. If disciplinary action has to be taken against the reporting employee, back up the employee’s personnel file with documentation of past performance concerns, particularly those preceding the employee’s blowing the whistle on misconduct

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