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Regulation and Compliance > Federal Regulation > SEC

Blowing the Whistle? SEC Has Your Back, Chief White Says

By Melanie Waddell

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The Securities and Exchange Commission is “the whistleblower’s advocate,” and the agency’s four-year-old whistleblower program can now be deemed a “success,” the agency’s chairwoman, Mary Jo White, said Thursday.

Speaking at the Corporate and Securities Law Institute at Northwestern University School of Law, White noted that while the agency’s whistleblower program, which was mandated by the Dodd-Frank Act, is still “evolving and improving,” the volume of tips “has been greater and of higher quality than expected when the program was first adopted” in 2011.

“We have seen enough to know that whistleblowers increase our efficiency and conserve our scarce resources,” White said. “Importantly, internal compliance programs at companies also remain vibrant and effective ways to detect and report wrongdoing.”

However, despite the “success” of the SEC’s program, White said, “the decision to come forward, especially in the face of internal pressure, is not an easy one.”

Whistleblowers, White said, “provide an invaluable public service, and they should be supported. And we at the SEC increasingly see ourselves as the whistleblower’s advocate.”

White added that the “ambivalence about whistleblowers can indeed sometimes manifest itself in an unlawful response by a corporate employer” and that the SEC is “very focused at the SEC on cracking down on such misconduct. We want whistleblowers — and their employers — to know that employees are free to come forward without fear of reprisals.”

White noted the first retaliation case, which the agency brought in 2014, as well as the first case “involving the use of a confidentiality agreement that can impede whistleblowers from communicating with us.” That case was brought against Houston-based global technology and engineering firm KBR Inc.

In fiscal 2014, the SEC received more than 3,600 tips (about 10 a day), which is up from about 3,200 tips in 2013. The whistleblower program became fully operational in mid-2011.

In the first quarter of 2015, those numbers have risen again, White said, “by more than 20% over the same quarter last year.” The tips, she said, have come from whistleblowers from all 50 states and 60 foreign countries, and span the “full spectrum” of federal securities law violations, most commonly relating to corporate disclosures and financial statements, offering fraud and market manipulation, as well as investment advisor fraud and broker-dealer rule compliance.  Companies should take “a hard look” at whether their boards and senior management are promoting whistleblower priorities, White said, adding that ”by some accounts, there is more work to be done.” She noted a survey of 2,500 executives worldwide, which found that as few as 7% of companies say whistleblowing is important for their organization and 44% say they do not have whistleblower policies or fail to publicize them.

“If that is so, it is little wonder that we are still wrestling with troublesome corporate cultures,” she said.

Companies, White said, should be asking themselves if they have created an environment where employees can report wrongdoing internally without fear of retaliation. ”Are they creating uncertainty through nondisclosure and other confidentiality agreements that could imply that such reporting might not be allowed? Again, there is some indication that management may need to work harder at this — those same 2,500 executives in the survey report that 40% of their companies discourage whistleblowing.”

The “ultimate goal” of the agency’s whistleblower program is “to deter further wrongdoing,” White added. ”It is no doubt too early to draw conclusions about whether the program has altered corporate behavior and reduced wrongdoing. But we certainly hope it has and will continue to do so. And we are not alone in this hope and expectation.”

— Check out SEC Awards Whistleblower in Paradigm Capital Case on ThinkAdvisor.

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