Worth Reading… Final SEC Whistleblower Rules

by Gary Larkin for The Conference Board – Governance Center Blog, May 31st, 2011.

As you all may well know by now, the SEC has adopted its final rules to create a whistleblower bounty program as part of the Dodd-Frank Act by a familiar 3-2 split vote. The rules, which go into effect 60 days after they are submitted to Congress or published in the Federal Register, has begun a second wave of client memos from some law firms.

Some of the early memos focus on the controversy over the possibility that the new $452 million SEC whistleblower bounty program could undermine the work of internal audit and compliance programs that were strengthened following the passage of the Sarbanes-Oxley Act in 2002. The fact that the SEC did not mandate employees must first go through those internal compliance programs led many to argue (including Commissioners Troy Paredes and Kathleen Casey) the bounty program would cause many whistleblowers to bypass their company programs. Their belief is that with the SEC now offering big monetary rewards for information leading to a successful enforcement of a securities violation and disgorgement of funds the agency will take the agency longer to investigate an alleged action than the company itself. (continue reading… )


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