Earlier this week, the National Whistleblowers Center held a seminar in Washington, D.C. to discuss the new developments under the Dodd-Frank Wall Street Reform and Consumer Act.
Dodd-Frank, passed last July, provides heightened protection for securities whistleblowers, and has brought about considerable changes in corporate compliance programs. Under the SEC's new whistleblower program, established this May, a whistleblower may receives an award for voluntarily providing 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."
Present at the seminar was Sean X. McKessy, the current Director of the Security and Exchange Commission Office of the Whistleblower. Among the issues that were addressed at the seminar was whether the SEC's new rules would undermine internal compliance programs. According to McKessy, the new SEC rules will not damage internal compliance systems, but are aimed at the 40 percent of frauds to go undetected.
According to Donna Boehme from Compliance Strategists LLC, the SEC struck a good balance between internal compliance and SEC enforcement action and allowing employees the option of whether to report violations internally. Boehme explained, "Employees really know if a company's compliance program is serious [or not]."
Boehme added that one good clue as to whether a compliance program is effective is who the chief compliance officer reports to. If the chief compliance officer reports directly to the board, it is much more likely that the compliance program has sufficient independence to carry out its mission. The reason is that the individuals with "specific, timely and credible information"-i.e. the CEO, CFO, general counsel, or HR director-are often the ones who are engaging in wrongdoing.
Another point made at the seminar was that the SEC's new rules recognize that individuals who were following the lead of a higher-up with dirty hands should not be punished for doing so. Those are the kind of people the whistleblower program targets. A large reason for this is that choosing to become a whistleblower is a big step that can cost one's career. As it was said at the seminar, "To catch a big fish, you need to put a lot of bait in the water."
Source: Whistleblowers Protection Blog, "NWC seminar on Dodd-Frank a huge success," Richard Renner, 20 July 2011.