The SEC's new whistleblower program has been the subject of extensive debate and discussion over the past several months. Starting in April, the program, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will provide substantial payments–between 10 and 30 percent of any penalty over $1 million–to any employee who provides a tip to the SEC regarding any violation of U.S. securities laws. That tip can be made immediately by the employee to the SEC, or within 90 days of an original report made by the employee through an internal compliance program. For in-house counsel, this means a maximum of 90 days to investigate the tip and to self-report before the employee does.

Putting aside the perverse incentive this creates for employees to circumvent corporate compliance programs in favor of immediately reporting the tip to the SEC, this relatively short 90-day window also raises the potential that employers might unwittingly– or even knowingly–elevate the need to self-report over the need to get the facts absolutely correct. In-house counsel must avoid the Hobson's choice of (i) self-reporting based on incomplete facts, or (ii) not self-reporting and allowing the employee to win the race to the SEC.

Although not in the context of Dodd-Frank, the recent headlines about Renault provide a (somewhat extreme) reminder about the pitfalls of drawing conclusions without having conducted a thorough internal investigation. The facts have been widely reported this week: Last August, several senior executives at Renault received an anonymous tip that the head of Renault's development project had negotiated a bribe. The executives authorized an internal investigation, and in January, before the investigation was complete, terminated the head of the division and two of his assistants. The decision was based, in part, on reports made by those conducting the investigation that the three senior managers had accounts in Switzerland and Lichtenstein into which the bribes were paid. The problem, it turns out, is that Renault rushed to judgment. There was no actual evidence that the employees participated in any wrongdoing, and no evidence of accounts in Switzerland or Lichtenstein connected to those employees. On Monday, Renault issued a formal apology to the terminated employees, the CEO took responsibility for the company's actions and the COO offered to resign. Several of the executives involved in the decision to terminate the employees will sacrifice their bonuses and stock option awards for the year.

This is an embarrassing series of events for Renault, but also a cautionary tale for in-house counsel. To be sure, the facts are unique in that Renault may have been the victim of an attempt to defraud the corporation. But the basic lesson learned– that internal investigations must be managed properly and premature conclusions avoided–is one that cannot be understated.

And so at the risk of stating the obvious, in-house counsel should have an established playbook for handling responses to employee tips. Ninety days is not a significant window of time, but knowing what specific steps will be taken in the face of an employee tip, who will be involved in the investigation and how inside and outside counsel, IT personnel and others will coordinate efficiently and productively, is essential. In-house counsel should have a list of outside law firms with little or no connection to the board or no longstanding relationship with the company. They should have a prepared list of outside experts–forensic accountants, for example– who can be called upon to help investigate allegations of impropriety. And most of all, after having supervised the investigation, in-house counsel should consider, in conjunction with outside counsel, whether decisions ranging from self-reporting to the termination of employees is based on concrete evidence.

These decisions are far from easy, but the basic steps outlined above can help inside counsel avoid the pitfalls arising out of Dodd-Frank's whistleblower provisions.

Read Matthew Ingber's previous column. Read Matthew Ingber's next column.

The SEC's new whistleblower program has been the subject of extensive debate and discussion over the past several months. Starting in April, the program, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will provide substantial payments–between 10 and 30 percent of any penalty over $1 million–to any employee who provides a tip to the SEC regarding any violation of U.S. securities laws. That tip can be made immediately by the employee to the SEC, or within 90 days of an original report made by the employee through an internal compliance program. For in-house counsel, this means a maximum of 90 days to investigate the tip and to self-report before the employee does.

Putting aside the perverse incentive this creates for employees to circumvent corporate compliance programs in favor of immediately reporting the tip to the SEC, this relatively short 90-day window also raises the potential that employers might unwittingly– or even knowingly–elevate the need to self-report over the need to get the facts absolutely correct. In-house counsel must avoid the Hobson's choice of (i) self-reporting based on incomplete facts, or (ii) not self-reporting and allowing the employee to win the race to the SEC.

Although not in the context of Dodd-Frank, the recent headlines about Renault provide a (somewhat extreme) reminder about the pitfalls of drawing conclusions without having conducted a thorough internal investigation. The facts have been widely reported this week: Last August, several senior executives at Renault received an anonymous tip that the head of Renault's development project had negotiated a bribe. The executives authorized an internal investigation, and in January, before the investigation was complete, terminated the head of the division and two of his assistants. The decision was based, in part, on reports made by those conducting the investigation that the three senior managers had accounts in Switzerland and Lichtenstein into which the bribes were paid. The problem, it turns out, is that Renault rushed to judgment. There was no actual evidence that the employees participated in any wrongdoing, and no evidence of accounts in Switzerland or Lichtenstein connected to those employees. On Monday, Renault issued a formal apology to the terminated employees, the CEO took responsibility for the company's actions and the COO offered to resign. Several of the executives involved in the decision to terminate the employees will sacrifice their bonuses and stock option awards for the year.

This is an embarrassing series of events for Renault, but also a cautionary tale for in-house counsel. To be sure, the facts are unique in that Renault may have been the victim of an attempt to defraud the corporation. But the basic lesson learned– that internal investigations must be managed properly and premature conclusions avoided–is one that cannot be understated.

And so at the risk of stating the obvious, in-house counsel should have an established playbook for handling responses to employee tips. Ninety days is not a significant window of time, but knowing what specific steps will be taken in the face of an employee tip, who will be involved in the investigation and how inside and outside counsel, IT personnel and others will coordinate efficiently and productively, is essential. In-house counsel should have a list of outside law firms with little or no connection to the board or no longstanding relationship with the company. They should have a prepared list of outside experts–forensic accountants, for example– who can be called upon to help investigate allegations of impropriety. And most of all, after having supervised the investigation, in-house counsel should consider, in conjunction with outside counsel, whether decisions ranging from self-reporting to the termination of employees is based on concrete evidence.

These decisions are far from easy, but the basic steps outlined above can help inside counsel avoid the pitfalls arising out of Dodd-Frank's whistleblower provisions.

Read Matthew Ingber's previous column. Read Matthew Ingber's next column.