opening the floodgates: the sec’s proposed whistleblower rules nina (nicki) locker steven...
DESCRIPTION
Whistleblower Statute - Highlights Increased bounty payments –10 to 30 % of monetary sanctions collected by SEC Voluntary submission of original information –Derived from independent knowledge/analysis –Must not be legally obligated to provide information Broad eligibility for bounty –Employees, analysts, suppliers, customers Certain individuals not eligible for bounty –Attorneys, accountants, compliance personnel 3TRANSCRIPT
Opening the Floodgates:The SEC’s Proposed Whistleblower Rules
Nina (Nicki) LockerSteven Guggenheim
Michael Winograd
Whistleblower Statute - Background
• The Genesis of the new rules – SEC’s lack of response to warnings re Madoff– Ineffective SEC bounty program before Dodd-Frank
Insider trading 10% awards $160,000 to 5 claimants since 1989
– Lack of robust internal corporate reporting processes SOX 301
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Whistleblower Statute - Highlights
• Increased bounty payments– 10 to 30 % of monetary sanctions collected by SEC
• Voluntary submission of original information– Derived from independent knowledge/analysis – Must not be legally obligated to provide information
• Broad eligibility for bounty– Employees, analysts, suppliers, customers
• Certain individuals not eligible for bounty– Attorneys, accountants, compliance personnel
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Whistleblower Statute- Highlights
• No requirement to report internally• Highly controversial
• Protections for whistleblowers– Confidentiality – Prohibits discrimination – Retaliation claims
Automatic remedies
• SEC can share whistleblower information with foreign governmental agencies
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Impact on Publicly Traded Companies
• Significant increase in SEC enforcement activity – FCPA: where the real money is
2010: 12 FCPA investigations with a total of more than $500 million in monetary penalties
Increased due diligence in M&A context
• Employees will bypass internal compliance processes
– No concrete incentive for reporting internally firstSEC “may” consider internal reporting in setting
reward– Investigation, remediation and self-reporting might
eliminate any monetary sanctions
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How to Preserve the Role of Internal Corporate Reporting
• Acknowledgments and certifications – Acknowledge obligations in whistleblower policy– Periodically certify that known misconduct has been
reported
• Incentivize reporting of potential violations– Establish and communicate whistleblower policies
Provide for confidentialityProtect whistleblowers
– Expand communication channels for internal reportingEmails, mail, hotline
• Seek feedback on communication channels
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