This past January, the Office of the Inspector General for the Securities
and Exchange Commission issued a very complimentary report about the SEC’s
newly-developed Whistleblower Program, which is designed to help the SEC
ferret out securities fraud. The findings are a clear tribute to the leadership
of Sean McKessy, head of the SEC Office of the Whistleblower. While the
SEC has not issued many awards yet, certainly the report supports what
I said in my blog entry,
SEC Hands Out Its Second Award to Whistleblowers; I believe the SEC is serious about investigating tips from whistleblowers
and about rewarding them.
According to the OIG’s
Evaluation of the SEC Whistleblower Program, the new rules and regulations that a whistleblower and his lawyer should
follow are “clearly defined and user-friendly.” The final
rules are appropriate for the group they were intended to reach, which
is “potential whistleblowers, compliance officers, corporate counsel,
and law firms engaged in whistleblower litigation” (like my law firm is).
The report touted the SEC for the way in which it has promoted the whistleblower
program by both “outreach efforts” and a “strong internet
presence.” The inspectors specifically noted the two videos by OWB
Chief Sean McKessy.
According to OIG, the SEC also is doing a good job of promptly reviewing
the complaints it receives. An impressive 84% of the tips received a preliminary
review within 1 day, and the agency is taking only 31 days to make a “No
Further Action” (NFA) determination.
In the sample size that OIG reviewed, the OWB designated 69% of the complaints
as being NFA – in other words, for whatever reason, 69% of the time
the SEC determined that it would not do any more investigation into the
The report recommended that the Office of the Whistleblower set out some
specific guidelines that will help it ensure that it is responding promptly
to the tips it gets, to whistleblowers’ requests for awards, and
to any other communications from “interested parties.”
The OIG made a very important statement that resonates with me, as an attorney
who represents whistleblowers: “The two most detailed studies we
reviewed concluded high rewards can motivate potential whistleblowers
to come forward because the monetary amount may mitigate the cost of professional
and social sanctions that can result.” When whistleblowers come
to me about a potential case, they are very upset at the fraud they have
witnessed, but they also are very worried about losing their jobs, even
being blackballed in their industries, if they come forward with information.
For its report, the OIG also interviewed people from other agencies that
administer whistleblower programs. It discovered that the government employees
who oversee these programs are not worried that high awards will result
in “illegitimate claims”, because they are “confident
their review process would weed out illegitimate claims through independent
corroboration of asserted facts.”
The report suggests that the SEC Office of the Whistleblower is in good
shape under the tutelage of Sean McKessy. I attended a seminar at which
Mr. McKessy spoke, and I was impressed with his commitment to encouraging
whistleblowers to come forward, and then listening to what they have to say.