More On Legal & Compliancefrom The Advisor's Professional Library
- Recent Changes in the Regulatory Landscape 2011 marked a major shift in the regulatory environment, as the SEC adopted rules for implementing the Dodd-Frank Act. Many changes to Investment Advisers Act were authorized by Title IV of the Dodd-Frank Act.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The former chief counsel at the Securities and Exchange Commission’s exam division, John Walsh, has formed a Whistleblower Response Team with several of his colleagues at the law firm Sutherland Asbill & Brennan to help firms develop whistleblower response programs as Walsh says the SEC’s “initiative is beginning to show traction.”
Walsh, a 23-year veteran of the SEC where he played a key role in creating the Office of Compliance Inspections and Examinations (OCIE), including serving as OCIE’s chief counsel, said in a statement that the SEC’s Whistleblower program, which the agency expanded under Dodd-Frank, is beginning to “see results.”
Walsh cites the November report issued by the SEC detailing the first seven weeks of the Whistleblower program that found that between Aug. 12 and Sept. 30, the SEC received 334 whistleblower tips, an average of nearly 48 per week.
The SEC report notes that the most common complaint categories were market manipulation (16.2%), corporate disclosures and financial statements (15.3%), and offering fraud (15.6%). The commission received whistleblower submissions from individuals in 37 states, as well as from several foreign countries, including China (10) and the United Kingdom (nine).
“Senior SEC officials have stated publically that they are now receiving high-quality information,” Walsh said. “As a result, we believe it is critical that companies receive the most up-to-date information and proper counsel to effectively respond to whistleblower claims as they emerge.”
Other members of Sutherland’s Whistleblower response team are Cynthia Krus, Allegra Lawrence-Hardy, and Holly Smith. The legal team will help clients create effective whistleblower response programs, respond to whistleblower claims, and defend against SEC enforcement actions and civil litigation.
Walsh, the former associate director and chief counsel at OCIE, retired from the agency at the
In August, the SEC launched a web page that allows individuals to report a violation of the federal securities laws and apply for a financial award. The whistleblower program provides a monetary incentive of between 10% and 30% of sanctions the SEC collects for whistleblowers who voluntarily provide the agency with original information that leads to a successful SEC action with sanctions exceeding $1 million.
While 170 applicable enforcement judgments and orders issued from July 21, 2010 through July 31, 2011 included the imposition of sanctions exceeding the statutory threshold of $1 million, the SEC explained in its report, because the 90-day application period had not passed with respect to any of these actions as of the end of the fiscal year, applications for awards had not yet been processed. Accordingly, the commission did not pay any whistleblower awards during fiscal year 2011.