Business Compliance Partners Issues Whistle-blower Program Update

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The Securities and Exchange Commission (“SEC”) is authorized by Congress to provide monetary awards to eligible individuals who provide high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected.

The SEC has issued the first monetary award from this fund known as the SEC Investor Protection Fund (“Fund”). The recipient helped the SEC stop a multi-million dollar fraud. The $50,000 payout represents 30 percent of the amount collected in the enforcement action against the perpetrators. The amount paid to the whistle-blower can increase if the SEC collects more money from the judgment.

The award was distributed a little more than a year after the rule establishing the Whistleblowers Program became final on August 12, 2011.

The SEC needed time to establish procedures for submitting tips, applying for awards, setting up the appeals process creating the criteria for making award decisions and implementing the prohibition against retaliation for whistle-blowing. The SEC also had to:

  •     Create an Office of the Whistleblower in the Division of Enforcement;
  •     Establish and implement internal policies, procedures, and protocols;
  •     Create a whistle-blower hotline and implement a 24 business hours call back protocol;
  •     Launch an Office of the Whistleblower website (http://www.sec.gov/whistleblower) with detailed information about the program, copies of the forms required to submit a tip or claim an award, notices of covered actions, links to helpful resources, and frequently asked questions;
  •     Confer with regulators from other agencies’ whistle-blower offices to discuss best practices and experiences;
  •     Publicize the program actively through participation in webinars, presentations, speeches, press releases, and other public communications;
  •     Update the web-based system for submitting tips, complaints, and referrals (https://denebleo.sec.gov/TCRExternal/index.xhtml); and
  •     Provide guidance to SEC staff regarding various aspects of the program, including the development of internal policies for handling confidential whistle-blower identifying information.

The SEC has established the following procedures:

  •     The SEC will decide in a timely manner if complaints received are credible, warrant sending to Enforcement or pursuing, or referring them to another law enforcement, or regulatory agency.
  •     The SEC will identify and track all enforcement cases involving a whistle-blower to document the whistle-blower’s participation.
  •     The SEC will forward complaints that relate to existing investigations to the assigned staff.
  •     After the entry of an award eligible judgment or order, the Office of the Whistleblower will publish a Notice of Covered Action on the Commission's website. Individuals have 90 calendar days after the Notice is posted to apply for an award by sending a completed Form WB-APP to the Office of the Whistleblower.

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Paul Cox

Chris Kosifas
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