The SEC Whistleblower Program

As part of the Dodd-Frank Act, signed by President Obama on July 21, 2010, the Securities and Exchange Commission (SEC) was required to amend the Securities Exchange Act of 1934, to establish a separate office within the SEC to administer a whistleblower program.  On May 25, 2011, the amendment was finalized.  On August 12, 2011, the Office of the Whistleblower in the Division of Enforcement went live.

Even though we are approaching the first anniversary of the amendment this month, office activity only occurred for nine months.  As required by the Act, the SEC reports the results of the program to Congress annually.  The first full-year of data is expected to be released November 2012 and will include information for Fiscal Year 2012.

In developing the Whistleblower program, the SEC’s intention was that whistleblowers would report their concerns/issues of abuse internally to their company first, prior to SEC external escalation.  As an incentive, the SEC offers a monetary award of 10% to 30% of collected penalties, to whistleblowers if the information provided is original; leads to a successful SEC action; and results in monetary penalties exceeding $1 million.

One can only assume that when internal reporting procedures fail a whistleblower has no recourse but to go external.  Public companies thus have a large incentive to ensure their internal procedures are optimal.  Following are Best Practices in the implementation of an internal company program —

  • Educate staff on proper policies & procedures and their responsibility to report abuses;
  • Establish an environment where whistleblowers can report confidentially and are protected against retaliation;
  • Develop a process for employees to escalate concerns internally to an impartial area responsible to investigate allegations;
  • Track tips reported and the investigations undertaken to prove or disprove the abuse; and,
  • Report program status periodically to the Board of Directors.

What’s your experience?

Author: Regis Quirin
Visit Regis's Website - Email Regis
Regis Quirin is a financial executive with 23 years of corporate experience, i.e. New York Stock Exchange, JP Morgan Chase, and GMAC ResCap; and 15 years working with small and medium-sized entities, i.e. joint ventures, start-up entities, established businesses. In 2014, Regis published "Redesign to Turnaround Underperforming Small and Medium-Sized Businesses" available via Amazon.
© Copyright 2012 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!

Regis Quirin

Regis Quirin is a financial executive with 23 years of corporate experience, i.e. New York Stock Exchange, JP Morgan Chase, and GMAC ResCap; and 15 years working with small and medium-sized entities, i.e. joint ventures, start-up entities, established businesses. In 2014, Regis published "Redesign to Turnaround Underperforming Small and Medium-Sized Businesses" available via Amazon.

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