Working for Justice

Compliance Officers May Receive Awards for Submitting Whistleblower Complaints to the SEC or CFTC

Posted April 20th, 2020 by in Retaliation Law, Whistleblower Law.

The SEC recently made a notable decision to provide an award to a whistleblower who had compliance-related responsibilities at the company where the whistleblower worked. The award of $450,000 was the SEC’s third whistleblower award to an individual who had compliance or internal audit responsibilities, according to the SEC’s press release.

The SEC and CFTC whistleblower programs, which were established by the Dodd-Frank Act, award 10 – 30% of recoveries to whistleblowers who report wrongdoing to the agencies. However, the agencies have special rules for individuals whose job responsibilities involve addressing potential compliance concerns at their companies. In response to concerns that compliance officials would report fraud to the Government before attempting to rectify the issues internally, the SEC has imposed special rules for such individuals. Under the Exchange Act Rule 21F-4(b)(4)(iii)(B), if the whistleblower obtained the information because of their role as an “employee whose principal duties involve compliance or internal audit responsibilities,” they do not receive credit for that information unless they report internally first.

But as whistleblowers are well aware, companies often do not respond well to employees who attempt to correct their malfeasance. Such employees are ignored or, worse, penalized. I have spoken with many individuals who reported compliance issues internally and expected the company to correct the issues, but were retaliated against instead. In this case, Jane Norberg, Chief of the SEC’s Office of the Whistleblower, noted that the employee had “suffered unique hardships” by trying to correct the conduct internally.

That is why the SEC rule permits compliance officials to receive a reward if they report to the SEC at least 120 days after they report internally, or 120 days after they receive the information if they “received it under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer” or the whistleblower’s supervisor was already aware of the information.

Of course, employees may be concerned about retaliation if they make a whistleblower submission after reporting internally. Fortunately, whistleblowers are permitted to file their SEC submissions anonymously. Even if the SEC is made aware of the identity of the whistleblower, it protects their identity. Dodd-Frank also provides anti-retaliation protections to employees who report to the SEC or CFTC.

If you have knowledge of securities laws violations, or have been retaliated against for raising compliance concerns, you should consult with a lawyer to determine whether you should bring a whistleblower case. Sanford Heisler Sharp, LLP has experienced whistleblower lawyers who are available to speak with you.

Inayat Ali Hemani is a Senior Litigation Counsel in the NY office who works primarily on whistleblower/qui tam cases.
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