In a recent speech at Northwestern University School of Law, Mary Jo White, chair of the Securities and Exchange Commission (SEC) called her agency “the whistleblower’s advocate.”
White was referring to the whistleblower program set up under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which owes its success in part to the support of the SEC, Forbes reports.
Under Dodd-Frank, whistleblowers have received payments totaling more than $50 million. In addition, the SEC has appeared as amicus curiae (friend of the court) in support of whistleblowers seeking protection under Dodd Frank’s anti-retaliation provisions, and the agency has pursued actions against companies that retaliate against whistleblowers or attempt to prevent whistleblowers from bringing tips to the agency, according to Forbes.
The SEC’s Office of the Whistleblower has received thousands of tips from whistleblowers from within the U.S. and from sixty foreign countries since its inception in 2011. White said the tips “are of tremendous help to the [SEC] in stopping ongoing and imminent fraud, and lead to significant enforcement actions on a much faster timetable than we would be able to achieve without the information and assistance from the whistleblower.” The program, White said, has “created a powerful incentive for companies to self-report wrongdoing to the SEC.” If companies do not report matters to the SEC themselves, the agency may hear about their conduct from someone else. Although monetary awards has thus far gone to fewer than 20 whistleblowers, the SEC encourages whistleblowers to provide information and SEC officials say the agency will do its utmost to protect whistleblowers from retaliation.
In the first retaliation case, the former head trader for Paradigm Capital Management received a $600,000 award, which represents thirty percent of the amount collected from Paradigm, the maximum percentage under the Dodd-Frank Act. The whistleblower reported trading activity that showed improper principal transactions. He was immediately demoted, according to Forbes. White said, “the SEC take[s] these whistleblower protections very seriously and companies should too.”
The SEC’s Enforcement Division is focusing on the use of confidentiality agreements or other such mechanisms “to improperly stifle whistleblowers from coming forward,” White said. In her speech, she noted an SEC enforcement action against a company that required internal investigation witnesses to sign confidentiality statements that included a warning that employees who discussed the subject matter of the interviews with outside parties without prior permission could face discipline. But White said companies should ensure that employees understand that “it is always permissible to report possible securities law violations to the Commission,” according to Forbes.
The SEC has filed amicus curiae briefs in cases before the Second and Third Circuit Courts of Appeals. Both cases involve whistleblowers who were terminated as a result of having made internal reports of suspected misconduct, according to Forbes. The SEC briefs in these cases argued that a whistleblower who reports suspected misconduct to the employer but not to the SEC is a still a “whistleblower” entitled to the protection of the Dodd-Frank Anti-Retaliation provision.