Stephen Cohen, an associate director of the Enforcement Division of the Securities and Exchange Commission (“SEC”), commented last week that companies should be trying to show off the quality of their internal compliance programs to dissuade the SEC from taking enforcement actions against them. The comments were made at the 2013 Corporate Whistleblowing Forum, where the discussion focused on the various whistleblower programs administered by the SEC, the Department of Justice, and the Community Futures Trading Commission (“CFTC”), including the initiatives created by the 2010 Dodd-Frank Act.
According to an article in the Wall Street Journal, Cohen stated he was “very surprised that we don’t see more sales and marketing pitches, by which I mean: what does your internal compliance program look like? I don’t see a lot of companies trying to sell us on the notion that they should be trusted to do an internal investigation because they have such a good internal compliance program and a culture of compliance and ethics.”
At a panel discussion on the SEC program, complaints regarding the delay in significant SEC whistleblower rewards were acknowledged in a slide with the caption, “What is the hold up?” The moderator of the panel, SEC co-chief of enforcement George Canellos, addressed the question by telling the audience that there were “a good number of cases that are going to involve awards to whistleblowers in the many millions of dollars each.”
Cohen also announced at the panel that the agency had received a similar number of tips this year as it had last year, when the agency’s new whistleblower office received roughly 3,000 tips. Cohen noted that the whistleblower tips were generally focused on violations of securities laws, combatting the assertions of many in the defense bar, who argued that the agency would be inundated with “complaints about petty theft and HR complaints.”
Finally, Cohen addressed the issue of internal reporting, and acknowledged that recent court decisions had called into question whether employees who blew the whistle about securities violations within their companies – rather than to the SEC directly – would be covered under Dodd-Frank’s anti-retaliation provision. As the WSJ correctly explained, “when the SEC was writing the rules for the new whistleblower program, companies argued that employees should raise allegations of corporate wrongdoing with their company first. But in an effort to escape liability, they are now increasingly claiming that tipsters aren’t protected if they didn’t go to the authorities.” Moreover, as Cohen stated that panel, the defense bar’s attempt to curtail whistleblower protections “sends a message that companies are not supportive of anti-retaliation provisions.”