Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
A Republican proposal to bar whistle-blowers who participated in the misconduct they report from collecting a bounty could harm SEC enforcement efforts, whistle-blower lawyers told Bloomberg BNA.
Allowing wrongdoers to obtain a whistle-blower award isn’t “ideal,” former Securities and Exchange Commission whistle-blower chief Sean McKessy told Bloomberg BNA. However, he said, with the inducement, enforcers can use the “little fish” to get the “big fish” in securities law violations.
“If only one culpable person came forward, we’d all agree it was worth keeping that door open,” said McKessy, a partner at Phillips & Cohen in Washington.
An SEC representative didn’t immediately respond to a request for comment.
The bar on bounties for co-conspirators was included in a memo circulated to Republican lawmakers by Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee. Hensarling is preparing to introduce an updated version of his Financial Choice Act. The SEC created the bounty rules when it set up its whistle-blower office in 2011 under the Dodd-Frank Act.
Whistle-blowers who participated in misconduct aren’t guaranteed a reward, McKessy said. If they do get a bounty, it likely would be lower than what they would receive if they didn’t participate in wrongdoing, he said. Under the bounty program, eligible whistle-blowers can receive from 10 percent to 30 percent of sanctions totaling at least $1 million.
The agency might have trouble uncovering some violations if it couldn’t reward co-conspirators for their help, said Washington lawyer Daniel J. Hurson, who represents SEC whistle-blowers.
Whistle-blowers “go through a lot of hell,” Hurson of the Law Offices of Daniel J. Hurson told Bloomberg BNA.
Hensarling spokesman Jeff Emerson declined to comment on the whistle-blower provision in the memo, telling Bloomberg BNA he hasn’t seen the document and couldn’t confirm its accuracy.
The U.S. Chamber of Commerce has pushed for a prohibition on co-conspirators receiving a bounty.
Marcia Narine, a former Ryder System Inc. executive, testified on behalf of the Chamber in a 2011 House Financial Services committee hearing on Dodd-Frank whistle-blower provisions, saying culpable individuals shouldn’t get rewards.
“This could lead to the bizarre result that an agent who is terminated after a company realizes that he has been committing unauthorized bribes for which the company could be liable could turn the company in to the SEC and DOJ for violations of the Foreign Corrupt Practices Act and could then conceivably collect a multimillion reward when the government fines the company,” she said in testimony prepared for the hearing.
Chamber spokeswoman Erica Flint declined to comment.
To contact the reporter on this story: Andrew Ramonas in Washington at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)