SOX Whistleblower Protection Limited

Bloomberg reports that a federal appeals court has ruled that the whistleblower protections afforded by the Sarbanes-Oxley Act do not apply when tipsters contact the media. The case involves two former Boeing employees who were fired after going to the media regarding the company’s alleged lack of security regarding financial reporting. The employees claim that they reported the problems internally, but were ignored. The court found that the SOX Act protects whistleblowers from retribution only when they alert Congress, federal authorities, or a supervisor, and that if Congress had intended to include the media, it would have stated so explicitly. Reaction to the ruling was mixed, with media representatives saying that press attention is often the best or only way to draw attention to a problem and protect investors, and with in-house attorneys saying that internal reporting is the best recourse. The case will be appealed.  

Whistleblowing Still a Hot Topic

The Dodd-Frank Act mandates new regulations for whistleblowing, and calls for the Securities and Exchange Commission to adopt new rules to reward those who come forward with actionable information about any securities violation (not just insider trading). Last fall, the SEC proposed that those who provide information leading to the recovery of more than $1 million could receive between 10 percent and 30 percent of the amount recovered. CFO Magazine reports that the commotion over the proposed regulations hasn’t died down; rather, it’s heated up. While some say that the proposed rewards will help keep firms honest, others say that the rewards incentivize individuals to bypass internal organizational reporting mechanisms and instead go straight to the SEC.



Are Whistleblowers the New Bounty Hunters?

The Dodd-Frank Act vastly expanded protections – and rewards – for whistleblowers, and some say that those on Wall Street are primed to cash in. A series of CNBC special reports shines the spotlight on how the new whistleblower laws could impact the workplace, as well as the cottage industry that is primed to leverage the DFA’s whistleblower provisions to their advantage.



SEC Proposes Whistleblower Rule

The Dodd-Frank Act authorized the Securities and Exchange Commission to increase rewards for whistleblowers, and Bloomberg reports that the SEC has proposed a rule outlining the higher stakes. In a 5-0 vote, commissioners put forth a proposal whereby, in cases where fines or ill-gotten gains exceed $1 million, whistleblowers can receive up to 30 percent. Currently, awards are limited to 10 percent and to insider trading cases. Corporations have expressed concern that greater rewards may incentivize employees to go directly to the SEC, rather than use intra-organizational hotlines and compliance departments.



Will Dodd-Frank Whistleblowers Bypass Compliance Officers?

According to the Washington Post, the Dodd-Frank Wall Street Reform and Consumer Protection Act includes whistleblower provisions that are causing some corporations to rethink their internal compliance policies. The so-called bounty program provides for whistleblowers to receive up to 30% of enforcement actions exceeding $1 million, which some say will incentivize employees to go directly to the SEC rather than to internal compliance officers. While the SEC hasn’t developed the necessary rules to implement the provision, companies are already reviewing employee complaint processes and procedures.