SEC Whistleblower Program

Transcription

1 SEC Whistleblower Program Presented by: Karl M. Strait, Partner Jennifer L. Farer, Associate Eric B. Martin, Associate

2 SEC Whistleblower Program Key Features SEC may pay rewards to individuals who provide SEC with high-quality tips that lead to successful enforcement actions relating to past, on-going or imminent violations of the securities laws. Bounties of 10-30% of collected monetary sanctions exceeding $1 million Need tips from those closest to an on-going fraud. (SEC Chairman Mary Schapiro) McGuireWoods LLP 2

3 SEC Whistleblower Program Key Features To receive an award, a whistleblower must Voluntarily provide the SEC with original information that leads to the successful enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. Whistleblowers may remain anonymous, but must be represented by an attorney and disclose identity before collecting an award Anti-retaliation protections apply to whistleblowers whether or not they qualify for an award McGuireWoods LLP 3

4 Avoiding unintended consequences... Seeks to balance need to encourage whistleblowers without promoting unintended consequences. Certain kinds of people are not be eligible for awards, e.g. people who have duty to report Information subject to attorney-client privilege or gained as result of legal representation independent public accountants officers, directors, trustees or partners who participate in internal compliance process; internal and external compliance personnel McGuireWoods LLP 4

5 Avoiding unintended consequences... Program includes provisions to discourage employees from bypassing their own company s internal compliance programs. Employee whistleblower who first reports internally can preserve place in line for SEC award (from date of internal report) if employee provides same information to SEC within 120 days. Information reported to SEC from the company s investigation will be considered when deciding whether to make an award and where the award should fall in the 10% to 30% range SEC can consider whether whistleblower participated in, or interfered with, company compliance programs when determining amount of award. McGuireWoods LLP 5

6 Concerns Provides windfall for whistleblowers Little, if any, incentive for internal reporting Encourages frivolous complaints McGuireWoods LLP 6

7 Internal Reporting Policies/Procedures - Design Update compliance and ethics programs based on legal developments and the times to ensure that an efficient, comprehensive action plan is in place that can be executed immediately 120 days to complete internal process Include a robust internal reporting system and incorporate provisions that encourage internal reporting Review anti-retaliation policies and revise as necessary McGuireWoods LLP 7

8 Design cont. Ensure that current policies, including confidentiality agreements, do not prohibit protected whistleblowing Review internal processes for issuing document holds Focus efforts on education and training of employees, board members, and personnel McGuireWoods LLP 8

9 Internal Reporting Policies/Procedures - Documentation Be prepared to demonstrate compliance efforts both generally and specifically Companies actions, both before and after reports are received, may be reviewed by the SEC with the benefit of hindsight Generally: document programs and process of implementation Specifically: make sure to appropriately document responses to each complaint, including the investigation process and the results McGuireWoods LLP 9

10 Internal Reporting Policies/Procedures - Implementation Cultivate a culture that emphasizes legal and regulatory compliance and ethical conduct and that encourages employees to report internally Bolster internal auditing and monitoring Engage in on-going oversight and review of the corporate compliance program at the board level Maintain open lines of communication Underscore the company s anti-retaliation policies Take all reports, even anonymous tips, seriously and act on them Take corrective action when wrongdoing is found McGuireWoods LLP 10

11 Do s and Don ts for Responding to Whistleblowers Expect increase in whistleblower claims Expect corresponding increase in retaliation claims Prepare now McGuireWoods LLP 11

12 Do s and Don ts for Responding to Whistleblowers Strengthen HR best practices Take proactive steps Handle whistleblowers properly McGuireWoods LLP 12

13 Strengthen HR Best Practices Detailed, accurate performance records Strong, clearly communicated non-retaliation policy Surveys and exit interviews Effective whistleblowing investigations McGuireWoods LLP 13

14 Take Proactive Steps Institute whistleblowing policy Reward compliance and reporting Train HR and Auditors McGuireWoods LLP 14

15 Handle Whistleblowers Properly Treat all reports seriously investigate report back Involve HR, Legal, and Senior Management Consider neutral investigator Actively prevent retaliation a word about confidentiality McGuireWoods LLP 15

16 Resources SEC Office of the Whistleblower ( The Rules for Whistleblowers: Significant Aspects of the SEC s Whistleblower Incentives and Protection Program ( Department of Labor Ruling Significantly Broadens Whistleblower Protections ( Event Archive: Whistleblowers & Corporate Fraud Investigations ( McGuireWoods LLP 16

17 For More Information, Contact: Karl M. Strait, Partner One James Center 901 East Cary Street Richmond, VA Jennifer L. Farer, Associate 2001 K Street N.W. Suite 400 Washington, D.C jfarer@mcguirewoods.com Eric B. Martin, Associate One James Center 901 East Cary Street Richmond, VA emartin@mcguirewoods.com McGuireWoods LLP 17