Are you prepared for the Whistleblower Rule?
Starting August 12, 2011, individuals who discover and report securities law violations can be eligible for significant financial rewards, under Section 922 of the Dodd-Frank Act. And in order to maintain regulatory compliance, firms must have a documented, independent investigation process to address the new rule.
According to the SEC, this new program “is primarily intended to reward individuals who act early to expose violations and who provide significant evidence that helps the SEC bring successful cases.” In other words, they are basically trying to prevent the type of shenanigans that contributed to the recent recession by offering financial compensation to individuals who proactively expose them.
Prior to the new rule, only insider-trading whistleblowing was eligible for reward. Now, virtually any financial misdeed is eligible. And since people who report a case to their employer will more than likely alert the SEC, too, firms must immediately address any potential whistleblowing.
Firms must also be wary of any proven retaliation against an employee who makes a report of a violation, as there is a provision in the anti-retaliation section of the rule for two times back pay relief (and other costly sanctions) if the firm retaliates.*
To help firms protect themselves and address their regulatory compliance requirements, we at Oyster Consulting are working with clients to:
- Establish firm processes and procedures.
- Conduct training on rules and the escalation process.
- Create an independent internal approach.
- Serve as the investigation team, when necessary.
Even if your firm is the most ethical, rule-following business in the country, the reality is that false allegations are possible, too. If you’re wondering what happens — and what to do — when someone blows a whistle they shouldn’t, be sure to visit our blog again in two weeks. In the mean time, if you have any questions about the Whistleblower Rule or Oyster Consulting, call me at 804.965.5403. I might not always be by my phone, but I will always call you back.
* ‘‘(C) RELIEF.—Relief for an individual prevailing in an [retaliation] action brought under subparagraph (B) shall include— (i) reinstatement with the same seniority status that the individual would have had, but for the discrimination; (ii) 2 times the amount of back pay otherwise owed to the individual, with interest; and (iii) compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees."