In-house counsel warns over corporate compliance and internal reporting

Eagle with flag in background.

Eagle-eyes and ears of corporate whistleblowers

Association of Corporate Counsel frustrated by SEC ruling on whistleblowing bounty provisions of Dodd-Frank

By ECM Plus staff

ECM Plus +++ The Association of Corporate Counsel (ACC) is strongly disagreeing with a new Securities and Exchange Commission’s ruling that bypasses internal compliance and reporting systems in favour of permitting tips from prospective whistleblowers to be submitted directly to the SEC.

“The SEC’s bounty rule is a Pandora’s box that, when opened, is likely to create new and even unanticipated harms rather than promoting better reporting of potential problems” commented ACC’s senior vice president and general counsel Susan Hackett.

“Once the floodgates are open, we question whether the SEC even has the capacity to handle a torrent of new reports” she added. “Listening to the SEC staff’s overview of the rule today, we are unclear if they understand what the impact of this rule will be. They are assuming that offering whistleblowers money to come forward will yield better results without imposing disproportionate costs for companies, shareholders and the very compliance programs that ACC members have spent decades building.”

ACC’s Associate General Counsel Amar D. Sarwal added: “As Commissioners Casey and Paredes noted today, the final SEC rules undermine internal compliance program by preventing companies from addressing festering allegations of misconduct. We plan to study the technical details of the final rule to see whether it addresses our concerns, ranging from the potential rewarding of wrongdoers and benefits to short sellers to possible violations of already existing legal ethics rules. In the immediate future, we will continue to work with our Chief Legal Officers and General Counsels members on compliance processes and best practices to ensure that SEC officials are aware of issues that may arise in the coming months.”

ACC said it has filed two comment letters with the SEC in December 2010 regarding the proposed rules governing its whistleblower bounty program. The first letter was co-signed by 270 global in-house leaders and the second letter submitted by ACC focused on “technical” issues raised by the proposed rules beyond the systemic concerns about compliance, ranging from awards for wrongdoers and short sellers, to legal ethics issues.


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Filed under Compliance, Corporate Governance, eDiscovery, Enterprise Resource Planning (ERP), GRC (Governance, Risk & Compliance), Industry News, Internal Controls, Regulatory Compliance, Reporting

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