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1 – 10 of 167Deborah Meshulam, Louis Ramos and Benjamin Klein
The purpose of this review is to unpack 2017-2018 US Securities and Exchange Commission (SEC) whistleblower developments and trends.
Abstract
Purpose
The purpose of this review is to unpack 2017-2018 US Securities and Exchange Commission (SEC) whistleblower developments and trends.
Design/methodology/approach
This paper draws on statistics in the SEC’s 2017 Annual Report to Congress on the Whistleblower Program and examines post-report SEC whistleblower activity, including three SEC whistleblower awards in March 2018 totaling $80 million+.
Findings
Several notable whistleblowing developments and trends have emerged in recent years, including an increase in total tips; an increase in international tips; higher-value awards, including multiple awards in excess of $20m; and interest in punishing companies that discourage and/or retaliate against whistleblowers. In addition, the SEC recently issued its first-ever award under the Exchange Act’s “safe harbor” provision.
Originality/value
This paper contains valuable insights about the activities and priorities of the SEC Office of the Whistleblower from experienced securities and white-collar-litigation lawyers.
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Andrea M. Scheetz and Joseph Wall
With the increasing prevalence of awards for reporting fraudulent activity, it is important to learn if there are unintended consequences associated with the language offering…
Abstract
With the increasing prevalence of awards for reporting fraudulent activity, it is important to learn if there are unintended consequences associated with the language offering such awards. Aside from issues regarding submitting unsubstantiated claims of fraud to the Securities and Exchange Commission (SEC), Section 922 of the Dodd–Frank Act may inadvertently encourage would-be whistleblowers to delay reporting fraud. Potential whistleblowers may choose to delay reporting due to the consideration of alternatives to external reporting, in a misguided attempt to increase the size of an award, or due to their ethical stance on the issues. Using a three-stage mixed methods (experiment, open-ended interviews, and experiment) approach, this study provides evidence that increased knowledge of statutes involving external whistleblowing may result in reporting delays. The data suggest that despite statements from the SEC forbidding this, managers may choose to delay reporting when under the threshold necessary to receive an award. In such a manner, managers may be allowing the fraud to grow to a necessary perceived level over time. As might be expected, the accountants in this study were more cautious, checking to see if internal reporting worked first. Of particular note, 16 individuals indicated that they would never report, with the motivation apparently driven by fear of job loss and/or retaliation. Lastly, the intention to delay or speed up reporting may be very different based on the perception of ethics involved in the decision.
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David B.H. Martin and Brandon K. Gay
The purpose of the paper is to summarize and discuss selected investor‐protection and other related enhancements to federal securities regulation contained in the Dodd‐Frank Wall…
Abstract
Purpose
The purpose of the paper is to summarize and discuss selected investor‐protection and other related enhancements to federal securities regulation contained in the Dodd‐Frank Wall Street Reform and Consumer Protection Act.
Design/methodology/approach
The paper discusses the following investor protections and related enhancements: enhanced whistleblower incentives and protections; expanded SEC investor‐protection administrative functions including the establishment of an Office of the Investor Advocate, the appointment of an Ombudsman, and the establishment on a permanent basis of an Investor Advisory Committee; expanded enforcement authority against aiders and abettors of securities violations; evaluation of the existing standards of care employed by broker‐dealers and investment advisers; a narrowing of exemptions from registration under the Securities Act, including by directing the SEC to enact rules to disqualify “bad actors” from relying on Rule 506 of Regulation D and adjusting the definition of “accredited investor” for purposes of the SEC's rules under the Securities Act; an exemption for certain small companies from the auditor attestation requirements of Sarbanes‐Oxley; provisions to increase the oversight and accountability of credit rating agencies; and steps to bolster the regulatory oversight of the municipal securities market, including by creating a new class of regulated intermediaries – “municipal advisors”
Findings
The Dodd‐Frank Act leaves many critical issues to be fleshed out through further SEC rulemaking and in the implementation phase, including: procedures regarding whistleblower information submitted to the SEC; the actual role of the Office of the Investor Advocate; whether the SEC will adopt a broker‐dealer fiduciary‐duty standard of care; additional texture on rules disqualifying bad actors from relying on Rule 506 of Regulation D; adjustments to net worth requirements related to accredited investor status; rules on disclosure of credit ratings in registration statements; and qualification standards for municipal advisors.
Practical implications
Public companies and other persons affected by the Dodd‐Frank Act should: keep abreast of key developments in the rulemaking phase; possibly participate in the rulemaking process: develop realistic strategies to respond to the proposed rules; develop compliance action plans; and review whistleblower‐related compliance policies and procedures.
Originality/value
The paper provides expert guidance from experienced securities and financial services lawyers.
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Mark Srere and Jennifer Mammen
To analyze the recent Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) whistleblower awards and to evaluate what issues may be important…
Abstract
Purpose
To analyze the recent Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) whistleblower awards and to evaluate what issues may be important for in-house counsel in the future.
Design/methodology/approach
The article discusses the most recent whistleblower settlements and focuses on lessons learned for compliance.
Findings
The SEC continues to publicize substantial whistleblower awards in an effort to attract additional whistleblowers and gather information that may lead to successful enforcement actions. In addition, the CFTC, whose corresponding Whistleblower Program has been slow to issue awards has announced that it is ramping up its program.
Practical implications
Companies should ensure that they have vigorous compliance programs in place to prevent and detect potential securities violations and to respond immediately in order to mitigate penalties that may result from inadvertent violations.
Originality/value
This article identifies recent awards issued under Whistleblower Programs created under the Dodd-Frank Act and should be of interest to publicly traded companies and all entities regulated by the SEC and CFTC that may be targeted by potential whistleblowers.
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Bryan B. House, Pam L. Johnston and Courtney Worcester
To explain a recent enforcement action by the USA Securities and Exchange Commission (SEC) whereby the SEC brought its first enforcement action for retaliation against a…
Abstract
Purpose
To explain a recent enforcement action by the USA Securities and Exchange Commission (SEC) whereby the SEC brought its first enforcement action for retaliation against a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
Design/methodology/approach
Explains the SEC’s recent enforcement action under Dodd-Frank, highlighting the efforts that a company undertook with respect to continuing to employ a whistleblower after potentially fraudulent activity was reported and discusses practical problems faced by such companies when trying to simultaneously investigate potential wrong-doing without being seen as retaliating against a whistleblower.
Findings
Through this enforcement action, the SEC has demonstrated a willingness to bring cases to enforce Dodd-Frank’s anti-retaliation provisions even though Dodd-Frank does not expressly grant it such enforcement authority.
Practical implications
Companies must have a strong culture of compliance and a strong policy encouraging whistleblowers to report concerns internally if at all possible. Once the whistleblower has reported to the SEC, a company will need to maintain the status quo with respect to the whistleblower.
Originality/value
Practical guidance from attorneys with experience with the SEC and whistleblower actions.
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Brian L. Rubin, Carmen L. Brun, Jaliya Stewart Faulkner, Michael K. Freedman, Kurt Lentz and Jae C. Yoon
The purpose of this paper us to summarize the remarks of the Commissioners and participants in several panel sessions and workshops during the 2013 annual “SEC Speaks” conference…
Abstract
Purpose
The purpose of this paper us to summarize the remarks of the Commissioners and participants in several panel sessions and workshops during the 2013 annual “SEC Speaks” conference held by the Practising Law Institute in cooperation with the US Securities and Exchange Commission, discussing the SEC's accomplishments in 2012 and its agenda for 2013.
Design/methodology/approach
The paper summarizes remarks by Chairman Walter and Commissioners Aguilar, Paredes, and Gallagher; provides highlights from panel sessions and workshops concerning the Division of Corporation Finance, the Division of Trading and Markets, the Division of Enforcement, the Division of Investment Management, the Office of Compliance Inspections and Examinations as well as highlights from the panel sessions relating to Accounting, Risk, Strategy and Financial Innovation. Judicial and Legislative Developments, and Ethics.
Findings
The summaries provide an overview of the SEC's most important current rulemaking, projects and policy priorities.
Originality/value
The paper presents current SEC issues and developments addressed by experienced SEC lawyers.
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Peter K.M. Chan and Amy J. Greer
This article serves as a timely alert to public companies and financial institutions of their potential risk exposure in light of the SEC’s aggressive interpretation of the…
Abstract
Purpose
This article serves as a timely alert to public companies and financial institutions of their potential risk exposure in light of the SEC’s aggressive interpretation of the Dodd-Frank whistleblower provisions. In particular, the article highlights the need of entities to ensure that their employment agreements, confidentiality provisions, and codes of conduct do not violate Dodd-Frank by inadvertently discouraging whistleblowing by their employees.
Design/methodology/approach
This article analyzes a recent and important speech by SEC Chair Mary Jo White regarding the SEC’s ongoing efforts to be the advocate of whistleblowers.
Findings
This article finds that the SEC will continue its role in protecting whistleblowers, including ongoing enforcement scrutiny of employment agreements and similar provisions that may discourage whistleblowers.
Practical implications
Among other things, this article highlights risk areas for public companies and financial institutions to address based on Chair White’s recent speech.
Originality/value
This article provides insights from two former SEC enforcement attorneys on an area that is of great concern to public companies and financial institutions in light of the increased focus by SEC enforcement.
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We review and summarize accounting literature that examines whistleblowing in the accounting context. We organize our review around the five determinants of whistleblowing…
Abstract
We review and summarize accounting literature that examines whistleblowing in the accounting context. We organize our review around the five determinants of whistleblowing identified by Near and Miceli (1995). The first determinant is characteristics of the whistleblower. Studies related to this determinant examine whistleblowers’ personality characteristics, moral judgment, and demographic characteristics. Studies related to the second determinant, characteristics of the report recipient, examine characteristics of the individual or individuals who receive the report and characteristics of the reporting channel. The third determinant is characteristics of the wrongdoer. Studies in this area focus on the wrongdoer’s power and credibility. Fourth, accounting studies related to characteristics of the wrongdoing examine factors that affect the dependence of the organization on the wrongdoing and evidence credibility. Studies related to the final determinant, characteristics of the organization, examine organizational perceptions of the appropriateness of whistleblowing, organizational climate, and organizational structure. For each determinant, we first summarize and analyze the findings of prior research, and then we present suggestions for future accounting research in whistleblowing.
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David Woodcock and Joan McKown
To note the increase in accounting and financial reporting matters at the Securities and Exchange Commission by highlighting a number of recent cases filed by the agency.
Abstract
Purpose
To note the increase in accounting and financial reporting matters at the Securities and Exchange Commission by highlighting a number of recent cases filed by the agency.
Design/methodology/approach
The SEC recently announced the settlement or filing of a number of significant accounting fraud cases. Coupled with recent statements by the SEC and the Department of Justice, it is clear that accounting fraud is a priority and that individuals are in the cross-hairs. This article discusses a few of the recent cases and the trend toward more financial reporting and issuer disclosure cases.
Findings
The number of financial reporting and issuer disclosure cases will likely continue to increase. Individuals will be targeted in more of those cases, internal controls will be a focus, whistleblowers will continue to be important in this area, and SOX 304 clawbacks will continue to be a weapon for the SEC.
Originality/value
Practical guidance from experienced securities and financial services lawyers.
Details