The Project On Government Oversight (POGO) raised concerns last week about how the Securities and Exchange Commission (SEC) is proposing to handle whistleblower tips. POGO submitted a public comment highlighting problems with the SEC’s proposed whistleblower award program, which does not go far enough in providing safe and open channels for disclosing corporate fraud, and may even put whistleblowers at risk.
The Dodd-Frank financial reform law made vast improvements to the SEC’s whistleblower award program, providing financial incentives for tipsters, and offering protection against retaliation. If implemented as Congress intended, this program will advance the SEC’s mission by ensuring a free flow of information from whistleblowers seeking to expose corporate fraud.
In the past few months, however, industry groups have been fighting tooth and nail to weaken the program, insisting that whistleblower awards will weaken internal corporate compliance. Some even want to make it a requirement for whistleblowers to report wrongdoing to their firms before going to the SEC—a dangerous proposal that would clearly undermine Congress’s intent to provide for anonymous and protected whistleblowing. Contrary to industry’s claims, a strong SEC program will actually put pressure on companies to strengthen their internal compliance programs.
POGO is also concerned by recent comments suggesting that the SEC will occasionally send tips back to the companies accused of wrongdoing and let them investigative themselves.
“As we saw in the Madoff debacle, the SEC needs all the help it can get from whistleblowers. Congress gave the SEC clear instructions to provide safe and open channels for receiving tips,” said POGO Executive Director Danielle Brian. “The SEC must not fold to industry pressure to gut the whistleblower program.”