New Report Offers Insights Into SEC Enforcement

Jordan Thomas -

Last week, Cornerstone Research released a new report, SEC Enforcement Activity Against Public Company Defendants, examining SEC actions initiated between fiscal years 2010 and 2015. Utilizing data from the SEC Enforcement Empirical Database, the report offers some detailed insights into SEC enforcement actions in recent years, such as:

  • The number of enforcement actions continues to increase. In fiscal year 2015, the SEC initiated a record 807 actions, which represented a 7% increase over fiscal 2014, and a 10% increase over the median number of actions for fiscal years 2010 through 2015.
  • Actions against public company defendants resulted in large penalties and disgorgements. Although actions against public company defendants represented an average of 4% of actions from fiscal 2010 through fiscal 2015, these actions accounted for 18% of all SEC monetary penalties and disgorgements during the period. 
  • The SEC has increasingly utilized administrative proceedings. In fiscal 2015, 76% of the SEC’s actions against public company defendants were brought as administrative proceedings. The use of administrative proceedings by the SEC to seek penalties, which was enabled by the passage of Dodd-Frank in 2010, has resulted in more streamlined and more prompt decisions according to the SEC. It is worth noting that the use of administrative proceedings is under attack, with many critics questioning the constitutionality of the proceedings. The resolution of these challenges may negatively impact the number and type of cases that are brought administratively by the SEC.

This report provides evidence of the powerful impact of law enforcement following the passage of Dodd-Frank, highlighting the SEC’s determination to utilize all tools at its disposal in order to prevent corruption and to seek out wrongdoing wherever it occurs.

The Truth About Corporate Whistleblowers

Jordan Thomas -
Disgruntled employees out for revenge. Rats. Opportunists. We’ve all heard the derogatory terms aimed at whistleblowers. And there’s a cruel irony at the core of the name-calling: since whistleblowers often operate quietly or anonymously, they are unable to correct the many common misconceptions about their character and motives.

In the aftermath of the financial crisis, however, interest in the ability of whistleblowers to deter misconduct has created a surge of studies and surveys that shed light on the average whistleblower. A whitepaper published this year by compliance organization The Network utilizes data from various sources, including the Ethics and Compliance Initiative’s National Business Ethics Survey, to provide a compelling snapshot of the average whistleblower. Here are just a few interesting details from The Network’s whitepaper:

  • 92% of whistleblowers report internally first. Furthermore, only 20% ever tell anyone outside their company and only 9% report to the government. Whistleblowers aren’t looking to punish companies. In fact, they most often speak out precisely because they care deeply about their workplaces.
  • Money is not the motivator. Research reveals that the primary reason whistleblowers go outside the company is a fear of retaliation – not a desire to collect a reward. According to the NBES survey, for instance, more than 1 in 5 respondents said they experienced retaliation after reporting internally and more than one-third of those who did not report internally said that fear of retaliation was the reason they chose not to do so.
  • Whistleblowers are good employees. Contrary to the stereotype of a resentful worker, in reality the average whistleblower is likely to be a well-regarded employee. Also, the whistleblower is likely to hold a high-level managerial or supervisor position within the company.

It has become increasingly clear that we must do all we can to protect and encourage truth-tellers. Standing at the crossroads of a pivotal time for corporate ethics, we have the opportunity to finally make progress against years of systemic corruption.

Law360 Minority Powerbroker Series

Jordan Thomas -
This week, I was honored to participate in Law360’s Minority Powerbroker Series. As I formulated my answers to five pivotal questions at the crossroads of race and professional development, I had time to reflect on the many colleagues and friends along the way who have been so supportive of my individual efforts. This made for a very rewarding Q&A! Please feel free to see the full article here.

Whistleblowers on Tour

Jordan Thomas -
This week, I was honored to participate in the NYC stop of the Government Accountability Project’s Whistleblower Tour, which seeks to educate the public about the important role whistleblowers play in promoting government and corporate accountability. Speaking on a panel with Enron Whistleblower Sherron Watkins, Jon Oberg, Louis Clark and Jennifer Pacella was a phenomenal experience, which I’ll dive into in a forthcoming post. My thanks to GAP for organizing this important event and to Baruch College for hosting. For more information in the meantime, here’s an excellent article in Corporate Counsel.

Achievements, Challenges and Change: A Look at the Past, Present and Future of the SEC Whistleblower Program

Jordan Thomas -
Four years ago, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping financial reform effort since the Great Depression. One of Dodd-Frank’s key charges was the creation of a whistleblower program that offered anonymous reporting, employment protections and significant monetary incentives to eligible SEC whistleblowers.

Is the program working? Are whistleblowers strengthening corporate compliance programs? Will the program be a game-changer in securities enforcement?  What makes corporate whistleblowers successful?

We invite you to read our Year in Review, a report that examines the major developments related to the SEC Whistleblower Program over the past 12 months and how these developments are likely to impact the future of corporate whistleblowing and how responsible organizations do business.

Thomson Reuters’ Legal Education Arm and Labaton Sucharow Join Forces: Six-Part Webinar Series Launched

Jordan Thomas -
In August, we launched the first in a six-part series, Whistleblowing in the Corporate World, presented with West LegalEd, part of Thomson Reuters. Our first webinar kicked off with "The Advent of the SEC Whistleblower Program" in which I provide an overview of the origins, mechanics, scope and implications of this important investor protection program. Stay tuned for news and updates on other webinars and feel free to check out our entire digital library in our resource center.