Second of two parts. Last week part one addressed the definition of whistleblower and eligibility. This part discusses internal procedures and award amount determination, and suggests best practices for corporate compliance.
The Securities and Exchange Commission in May issued its final whistleblower rules as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress last year. In so doing the SEC refused to require that a whistleblower initially report possible violations through internal compliance procedures before providing information to the SEC. Numerous commentators argued that the lack of such a requirement would undermine internal control procedures required by Sarbanes-Oxley and that companies should be permitted to investigate and remedy potential misconduct on their own before being subjected to a SEC investigation. The SEC responded that there could be instances where “internal disclosures could be inconsistent with effective investigation or the protection of whistleblowers,” and that whistleblowers should be allowed to assess whether reporting possible violations internally would be effective.
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