When the SEC pays your lawyer for informing on you… Is that a good thing?

Print Friendly, PDF & Email

Publisher: Forbes
Author: Daniel Fisher
 

The SEC announced it paid a $1 million bounty to a compliance officer who blew the whistle on his employer, the second such case where the agency has paid a company official charged with rooting out misconduct for bringing evidence of it to the SEC instead.

In its news release, the SEC is careful to note it adhered to rules it developed after the Dodd-Frank Act of 2010 authorized bounties for employees who bring information about securities law violations to the SEC. To avoid obvious conflicts of interest – not to mention potential breach of the attorney-client privilege – whistleblowers who work within a company’s compliance division must first report the suspected wrongdoing to a superior, then wait 120 days before determining nothing will be done about it and going to the SEC.

But is that enough? Some lawyers, as well as the influential New York County Lawyers’ Association, think not. By paying the very people whose job it is to make sure a company is complying with the law for information suggesting it’s breaking it, the government is giving them a strong incentive to sit back, wait 120 days, and try to cash in.

When the SEC was developing the rules for whistleblowers, “a lot of comment revolved around `we can’t have a system that allows in-house counsel and compliance officials, who are tasked to be at the epicenter of problems and solve those problems, to be incentivized to end-run their employer and go to the SEC,’” said Gregory Keating, a shareholder with Littler Mendelson and management representative on the Congressional Whistleblower Protection Advisory Committee.

For full access to the article, please click here.

By : Securex /April 28, 2015 /Uncategorized /1 Comment