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SEC to Continue Crackdown on ‘Stifling’ of Whistleblowers

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The SEC’s Whistleblower office will continue to crack down on firms, including advisors, who violate confidentiality, severance, and other kinds of agreements that may stifle a would-be whistleblower, Jane Norberg, chief of the agency’s Office of the Whistleblower, told Congress.

Using practices to stifle a would-be whistleblower will continue to be a “top priority” for the whistleblower office in the upcoming fiscal year, as will identifying “fact patterns of retaliation” to ensure that whistleblowers feel comfortable reporting wrongdoing without fear of repercussions, Norberg said in her report.

The agency warned advisors and broker-dealers in a late October risk alert that examiners are zeroing in on their compliance with key whistleblower provisions under Rule 21F-17 of the SEC’s whistleblower regulations.

In June, Merrill Lynch agreed to pay $415 million and admit wrongdoing to settle charges that the firm violated the customer protection rule. Also, Merrill settled charges for violating Rule 21F-17(a) by using language in severance agreements that operated to impede employees from voluntarily providing information to the SEC.

Norberg was appointed the head of the agency’s whistleblower office in late September. She has served as acting chief since Sean McKessy left in July and joined the SEC in 2012 as the first deputy chief of the whistleblower office, which she helped set up in 2011.

The agency doled out $57 million in awards for fiscal 2016, more than all other years combined, and gave out a $20 million award on Nov. 14 — the third-highest since the SEC’s whistleblower program issued its first award in 2012. The program has now awarded more than $130 million to whistleblowers who voluntarily provided the SEC with unique and useful information that led to a successful enforcement action.

Six of the ten highest awards were made in fiscal year 2016 and 4,200 tips were received – a 40% jump from 2012.  

International tips rose from the previous year with Australia coming in at No. 3 on the list, up from No. 5 last year. FCPA tips jumped nearly 28% from last year.

Since launching the program, the agency has awarded nearly $111 million to 34 eligible whistleblowers.

The report states there are “commonalities among many of the tips or complaints” that were submitted by these successful whistleblowers.

“The information provided by each award recipient was specific, in that the whistleblower identified particular individuals involved in the fraud, or provided specific documents that substantiated their allegations or explained where such documents could be located.”

In some instances, the whistleblower identified specific financial transactions that evidenced the fraud, or provided detailed assessment of the wrongdoing, the report notes. 

— Related on ThinkAdvisor: SEC Zeros In on Advisors’ Whistleblower Compliance


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