Securities firms and their general counsel are openly worried about the SEC’s whistleblower program. They fought tooth and nail to stop the program, arguing that whistleblowers would bypass the companies’ internal channels and take information straight to the SEC. However, the program is in place and the first award was granted in August, with the SEC awarding the first recipient the full 30% of a $1,000,000 fine. That has led to more tips and set off a new round of hand wringing among corporate executives about all the problems the whistleblowers may cause them, which makes one wonder what they know that the SEC ought to know about.
As of November 2012, the SEC had received 3,001 whistleblower tips ? approximately 8 per day. The SEC is on record as hoping to make significant payouts to whistleblowers in the future. That should result in more information and ultimately less wrongdoing. Securities firms should be shouting praises about the law. One would expect these firms to at least tip their hats at the prospect of rooting out corruption, but does not appear to be the case, according to the Wall Street Journal (“Legal Maze’s Murkiest Corners Worry Companies”).
In expressing their concerns about “disgruntled employees angling for a financial reward [who] will bypass internal procedures designed to expose potential wrongdoing and instead run straight to the SEC,” corporate counsel have revealed their cynical defense playbook. The truth is that many firms mistakenly try to conceal wrongdoing and intimidate employees into silence. If companies truly had a “robust” compliance system in place that valued whistleblowers, they would not be bypassed.
If some companies may now be correcting these problems, it is only because they are becoming convinced it is in their financial interest to do so. Despite the David and Goliath jokes, no Wall Street firm wants a visit from the SEC. Whistleblowers are good for America and, whether they know it or not, ultimately good for securities firms and the markets in which they participate. Let the payouts continue.
Page Perry, LLC is an Atlanta-based law firm with over 150 years of collective experience maintaining integrity in the investment markets and protecting investor rights.