Could SEC Whistleblower Bounty Program Harm Internal Compliance?

Although nearly everyone - including the five SEC commissioners - agrees that corporate whistleblowers are the best source for detecting corporate fraud, there is trepidation about the proposed whistleblower bounty program under the Dodd-Frank Act. Many are concerned that the SEC program could undermine or bypass successful corporate compliance programs.

In fact, the SEC staff in its official proposed whistleblower rule released for comment last week addresses this issue:

"We emphasize, however, that our proposal not to require a whistleblower to utilize internal compliance processes does not mean that our receipt of a whistleblower complaint will lead to internal processes being bypassed. We expect that in appropriate cases, consistent with the public interest and our obligation to preserve the confidentiality of a whistleblower, our staff will, upon receiving a whistleblower complaint, contact a company, describe the nature of the allegations, and give the company an opportunity to investigate the matter and report back."

Read the rest of this article on the Corporate Governance Blog

 

For More Information:

Dodd-Frank whistleblowers are discussed in greater detail in 2 A.A. Sommer Jr.,  Federal Securities Exchange Act of 1934 Sec. 9.12 (Matthew Bender Rev. Ed.), "Specialized Treatment of Illicit Insider Trading," which can be accessed online by subscribers of lexis.com.  This treatise is also available in the LexisNexis online store.