SEC Whistleblower Program Now In Effect

With its new whistleblower program officially becoming effective on August 12, 2011, the SEC launched a new webpage for people to report violations of the federal securities laws and apply for a financial award.

Prior to the enactment of the Dodd-Frank Act, the SEC only had authority to reward whistleblowers in insider trading cases. Now, the Dodd-Frank Act provides the SEC with the authority to pay financial rewards to whistleblowers who provide new and timely information about any securities law violation. Among other things, whistleblowers who provide original evidence of securities laws violations may be eligible to receive between 10% -30% of recovered funds if the information results in the recovery of at least $1 million.

Under the newly implemented program, whistleblowers may be employees or outsiders of the entity that they provide relevant information on. If the whistleblower is an employee of the firm, the Dodd-Frank Act provides for anti-retaliation provisions to protect these employees from the possibility of employer reprisals.  In light of the fact that employees may be incentivized to circumvent internal reporting chains, investment advisers, private fund managers, broker-dealers and other entities subject to the SEC’s rules should consider the following tips to increase the likelihood that possible violations are reported early and internally:

  • Create an environment of compliance that begins with a tone at the top;
  • Continuously train employees on regulatory compliance;
  • Establish an anonymous reporting hotline;
  • Maintain the confidence of those who report possible violations; and
  • Consult with counsel to determine the advisability of self-reporting discovered violations.

For more information, please contact Brent Cunningham, Associate Attorney, at 619.298.2880 or at brent.cunningham@jackolg.com.

 

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Filed under Broker-Dealers, Hedge Funds, Insider Trading, Investment Advisers

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