Header graphic for print
Federal Securities Law Blog Information on federal securities laws, news and developments

SEC Launches Website For The Office of the Whistleblower As Rules Become Effective

Posted in Dodd-Frank Act, SEC News, Whistleblower Issues

The SEC announced that its Whistleblower Rules, adopted on May 25, 2011 became effective today and the Commission launched its new web page (here) for that particular office.  In addition, in his first speech since being appointed as Chief of the Office of the Whistleblower, Sean McKessey addressed some misunderstanding about certain hotly debated issues related to the whistleblower program.

As previously discussed here, the SEC adopted final rules to implement Section 922 of the Dodd-Frank Act regarding securities whistleblower incentives and protection by a narrow 3-2 margin (as Commissioner’s Kathleen Casey and Troy Parades opposed the adoption of the Rules as written). One of the points of disagreement between the Commissioners was the struggle to strike a balance between the importance of the corporation’s compliance programs and the incentive for the whistleblower to report directly to the SEC (and by-pass the corporation).

In its announcement today, the SEC emphasized that the new web page "includes information on eligibility requirements, directions on how to submit a tip or complaint, instructions on how to apply for an award, and answers to frequently asked questions."

In his speech on Thursday, August 12, 2011 Mr. McKessey summarized the new program as providing "a monetary incentive of between 10 and 30 percent of sanctions we collect for [the Whistleblower Office] who voluntarily provide us with original information that lead to a successful SEC action with sanctions exceeding $1 million."

Mr. McKessey was pleased by the impact the Whistleblower Program has already had:

While the final rules go into effect tomorrow, we have already seen an increase in the quality of the tips we have received since the passage of Dodd-Frank in July 2010. Long letters that include detailed information about potential violations. It’s information like this that can save our attorneys months of investigation and allow us to stop a fraud earlier in the process.

In an effort to address certain misunderstandings he said were apparent from the commentary on the rules and his own outreach efforts, Mr. McKessey highlighted three issues:

• Issue Number 1: The Whistleblower program will bolster, not hamper, the internal compliance systems at companies across the country.

• Issue Number 2: The final rules recognize that in most instances, attorneys, compliance personnel and external auditors should not be allowed to become whistleblowers.

• Issue Number 3: The whistleblower program ensures that efforts to address misconduct are sped up, not delayed.

He said that the Commission "has been working with insiders and whistleblowers long before the whistleblower award program was established and, when appropriate, we have included the company in efforts to investigate and punish wrongdoing most effectively and efficiently." He further explained that "[c]ompanies should expect that the SEC’s practice of involving them where appropriate will continue."