Is Your Firm’s Whistleblower Program Effective?

The Securities and Exchange Commission (“SEC”) recently awarded two whistleblowers with monetary awards for providing significant information that helped the SEC stop fraudulent schemes. The first individual earned an award of $277,000 for bringing forward information that unveiled a scheme that preyed on retail investors. The other, a harmed investor, received $45,000 for providing information that helped the SEC discover misconduct and return money to other victims.


Read the SEC’s Press Release.

According to the SEC’s 2019 Whistleblower Program Report to Congress, the Whistleblower program has recovered $2 billion in monetary sanctions and $500 million has been or will be returned to harmed investors since its inception.

Individuals who have voluntarily provided the SEC with original, timely information that has led the SEC to recover more than $1 million, receive awards totaling between 10 and 30 percent of the money collected. Since the program began, the SEC has awarded $387 million to 72 individual whistleblowers. In the fiscal year 2019, seven of the eight individuals who received whistleblower awards first reported the violations to their employer.


Does Your Firm Have a Whistleblower Policy?

Effective whistleblower policies will help mitigate risks for enforcement actions and promote positive and proactive company culture.

The commitment of the top-level leadership and management is critical to the success of the program as it sets the tone that employees may trust that reported concerns will be taken seriously. Making clear whistleblower policies readily accessible to all employees will help ensure they have an understanding of their responsibilities and rights.


Reporting Concerns or Complaints

An effective whistleblower program encourages employee participation by providing more than one avenue for employees to submit complaints or concerns. Options may include submitting complaints through their supervisor, a phone line, email, or website. At least one of the channels should provide an anonymous option for the employee to submit a complaint. Policies should further make it clear that employees may choose the channel by which they submit their concerns and that they may also choose to report allegations to governmental or regulatory agencies without being penalized.

Providing resources to help employees confidentially learn about their rights and deal with the stresses of submitting a whistleblower complaint will also promote a positive reporting culture.


Internal Investigation and Review Process

Once a complaint is submitted, the firm must assume the complaint has merit. Policies should outline an expectation that all supervisors or managers respond immediately upon receiving a report or complaint.


Anti-retaliatory Policies and Training

Effective training will help ensure that employees and management understand the laws and regulations prohibiting retaliation against employees who have reported a concern.

The following may be considered retaliation:

  • Disciplinary actions
  • Firing or laying off
  • Denial of overtime or benefits
  • Demotion or denial of a promotion
  • Blacklisting
  • Ostracizing, mocking, intimidating
  • False accusations of poor performance

Providing whistleblower training to supervisors and managers is critical as not all retaliatory actions are intuitive. Training should address how to respond to a workplace concern while protecting the employee’s confidentiality, how to avoid retaliatory actions and all appearance of retaliatory actions, and how to separate motives and questionable behavior from the reporting employee from the concern itself.

As laws regularly change, it is important to identify a member of management who will be responsible for updating policies and training with new laws and with any weaknesses identified within the firm.


Responding to Reports of Retaliation

A whistleblower program includes an established retaliation response protocol. Employees who believe they have been subjected to retaliation should not be expected to report the complaint to their supervisors, especially if the supervisor is the one who has allegedly retaliated against them. Information about how to submit a complaint about a retaliatory action should be available and communicated regularly to employees.

Your whistleblower program should include an investigation protocol that outlines a timely response in the form of an independent and objective investigation. The involvement of senior leadership is important.

If an investigation determines that retaliation has taken place, the firm should take immediate action to appropriately respond to the employee and discipline the source of the retaliation. Additionally, the firm should review and enact changes to its processes in order to prevent future retaliation or a chilling effect that will prevent employees from coming forward with concerns.

Regardless of the result of the investigation, management may want to periodically follow up with the employee to ensure they are protected from any ongoing or future retaliation.


Let Our Experience Work for You

In order to ensure that your whistleblower program is well designed to protect both your firm and employees, regular monitoring and auditing of the systems is necessary.

Anonymous surveys, employee interviews, and complaint files or exit interviews are all good resources for evaluating whether or not employees feel comfortable about coming forward with concerns.

Core Compliance and Legal Services, Inc., is available to help your firm establish, review or change your firm’s whistleblower program. Contact our team of experts today.


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