SEC to check on anti-whistleblowing policies

Securities and Exchange Commission examiners will start prioritising checks on compliance with whistleblower protection laws, the commission announced this week.

Examiners will be checking compliance manuals, codes of ethics, employment agreements and severance agreements to see whether provisions in these documents may restrict people from speaking to the SEC, the commission said in a risk alert released on Monday.

“This review is included in examinations when staff deem it appropriate,” the alert said.

Private fund managers should ensure whistleblowing activities are carved out from general confidentiality agreements, so staff are not prevented from raising concerns with the commission due to privacy rules, it said.

“[The] SEC is not trying to dictate the language of these agreements or warnings—that is the company’s responsibility. But a company needs to speak clearly in and about confidentiality provisions, so that employees, most of whom are not lawyers, understand that it is always permissible to report possible securities laws violations to the Commission,” SEC chair Mary Jo White said in a speech in 2015.

The SEC’s whistleblower program was inaugurated in 2011 and developed under the Dodd Frank Act. It gives whistleblowers up to 30 percent of a penalty for a securities violation if that penalty exceeds $1 million. The SEC can also use its enforcement power to prevent companies from muzzling tipsters.

Its crackdown on contravention of the rules was evident in the 2016 fiscal year; the agency distributed $57 million in whistleblower awards to individuals, the largest ever in value terms in a single fiscal year, according to SEC data.

Over the same period was issued two of its highest-ever whistleblower awards, totalling $39 million.