Editor's Note: The U.S. Securities and Exchange Commission approved new rules, "Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934" which follow a directive in the Dodd-Frank Wall Street Reform and Consumer Protection Act that the SEC establish a program that pays an award to whistleblowers who voluntarily provide the commission with original information about violations to federal securities laws that lead to enforcement.
Prior to the vote, there was much feedback from many sources citing that such a law could undermine internal efforts already in place, as mandated by the Sarbanes-Oxley Act of 2002. It's quite apparent that this provision is controversial, so we are presenting two authorities on the subject with starkly different assessments of this new whistleblower rule. These opinions are those of the authors and do not reflect FEI opinions or positions.
What do you think, and how you believe it will affect your business? Please send your comments to eheffes@finan cialexecutives.org and we will publish them in the September issue of Financial Executive.--Ellen M. Heffes
The SEC Whistleblower Rules Make Sense
By Reuben Guttman
Reuben Guttman, a director of law firm Grant & Eisenhofer, heads its whistleblower and qui tam litigation department He is a founder of the website www.whistleblowerlaws.com and a senior fellow and adjunct professor at the Emory University School of Law Center for Advocacy and Dispute Resolution.
During the lengthy rulemaking process prior to the U,S. Securities and Exchange Commission promulgating its rules implementing whistleblower provisions of the Dodd-Frank law on May 25, every poster child for failed internal compliance programs made a pitch to the agency urging final rules requiring whistleblowers to report to corporate internal compliance programs before raising their concerns to the SEC.
Less than two years after a wake of failed internal compliance programs left the United States on the precipice of an economic meltdown, we can no longer trust--let alone take the risk of--allowing corporate internal compliance programs to be the safeguard against the type of wrongdoing that can be so devastating to shareholders, consumers and taxpayers. That is why the SEC got it right in promulgating rules that do not require whistleblowers to go to corporate internal compliance departments before making a report to the agency.
In rejecting a...