SEC warns advisors and brokers to comply with whistleblower protection rule
Monday, October 31, 2016 at 7:00AM
Richard L. Cassin in Anheuser-Busch InBev, BlueLinx, Health Net Inc., International Gaming Technology, KBR, Merrill Lynch, Paradigm Capital Management, Retaliation, Whistleblower

The U.S. Securities and Exchange Commission has warned investment advisers and broker-dealers to comply with the Dodd-Frank whistleblower-protection rule.

The SEC’s office of compliance inspections and examinations said in a risk alert (pdf) it will look for illegal restrictions on individuals communicating with the SEC about potential securities law offenses.

SEC examiners will focus on compliance manuals, codes of ethics, employment agreements, and severance agreements.

The agency said it brought some recent enforcement actions because employers had used language in confidentiality or other agreements that violated SEC Rule 21F-17(a) by impeding an employee from communicating directly with the SEC.

The alert cited enforcement actions against KBR, Merrill Lynch, Health Net, BlueLinx Holdings, and Anheuser-Busch InBev.

(The SEC has also brought enforcement actions against Paradigm Capital Management and International Gaming Technology under the anti-retaliation provisions of the Dodd-Frank Act.)

The SEC alert said violations of Rule 21F-17 can appear in agreements that

(a) require an employee to represent that he or she has not assisted in any investigation involving the employer

(b) prohibit any and all disclosures of confidential information, without any exception for voluntary communications with the SEC concerning possible securities laws violations

(c) require an employee to notify and/or obtain consent from the employer prior to disclosing confidential information, without any exception for voluntary communications with the SEC concerning possible securities laws violations, or

(d) purport to permit disclosures of confidential information only as required by law, without any exception for voluntary communications with the SEC concerning possible securities laws violations.

The SEC has awarded more than $111 million to 34 whistleblowers since the program started in 2011.

Whistleblowers can be eligible for an award when they voluntarily provide the SEC with "unique and useful information" that leads to a successful enforcement action with recoveries of more than $1 million. Awards can range from 10 percent to 30 percent of the money recovered.

The biggest SEC whistleblower award was more than $30 million in 2014.

The agency made its second biggest award of $22 million in August this year.

The first FCPA-related whistleblower award was reportedly paid in May. A BHP Billiton insider collected $3.75 million for information about FCPA offenses during the 2008 Beijing Olympics, the reports said.

The SEC received about 4,000 tips last year and more than 14,000 since the program started. Tips have come from individuals in all 50 states and the District of Columbia and 95 foreign countries.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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