The decision of whether or not to blow the whistle on your employer if you’ve witnessed a compliance infraction or violation of securities law is not an easy one. While it may be the right thing to do, many people feel loyalty to their employer, plus you have your career and job prospects to think about. And what kinds of offenses rise to the level where blowing the whistle is the right course of action? There are several variables to consider.
One factor to keep in mind is the potential reward for sharing useful information about a bad actor with regulators.
The Securities and Exchange Commission’s (SEC) Office of the Whistleblower recently gave its annual report to Congress, revealing that it distributed $57m in awards during fiscal-year 2016, more than any other year, not including a $20m award announced just after the report was published. This year, the SEC got 4,200 tips – a 40% jump from 2012 – and made six of the ten highest awards ever. To date, the SEC’s whistleblower program has given out close to $111m to 34 whistleblowers since it debuted in August 2011.
Here’s what you should consider if you’ve witnessed a potential violation but are unsure whether or not you should blow the whistle on your employer, according to Jordan Thomas, a partner at Labaton Sucharow.
1. Don’t look the other way
What should you look out for? Among the types of violations that whistleblowers reported the SEC, the biggest jump was in corporate disclosures and financial reporting violations, essentially accounting fraud, representing 22% of all tips.
2. You don’t need to be a compliance pro or legal expert
You don’t need to have a mastery of securities laws to be a whistleblower; you need to only to identify possible securities violations.
“You don’t have to be right – you just have to have a belief that there is a possible securities violation,” Thomas said. “Securities laws are very broad, and if the misconduct involves a publicly traded company or a financial services company, whether public or private, that is registered with the SEC or a self-regulatory body like Finra, those are the types of enterprises that are subject to SEC jurisdiction.”
3. Trust your gut
Ask yourself, if I were a journalist, or if I told a journalist about this problem, would they want to write about it?
“If the answer is yes, then they should consider reporting it or consulting an attorney about reporting the possible securities violation,” Thomas said. “If it’s significant enough that a journalist would want to write about it, then the SEC would want to know about it.”
4. Look up the relevant regulation
Do research on whether the conduct constitutes a violation, or consult an attorney.
5. If you’re worried about your career, reveal information anonymously
It’s understandable that you might be concerned about reprisals or a negative impact on your reputation or future career prospects if you blow the whistle on your employer, so the SEC allows whistleblowers to report infractions anonymously via an attorney and still collect the award.
“The IRS needs to track the amount of the award and the SEC needs to know you’re not the bad guy, but you can be a whistleblower without revealing your identity,” Thomas said.
In addition, the SEC provides employment protections for people who choose not to report anonymously, he said.
6. There are both moral and selfish reasons to blow the whistle
If you’ve witnessed or heard about wrongdoing, then blowing the whistle is the right thing to do.
Reporting a securities violation to the SEC could also give you a nice pay-day. The regulator has handed out large monetary awards to whistleblowers ranging from 10% to 30% of the monetary sanctions collected by the SEC.
Source : Dan Butcher, efinancialcareers.com