The internal watchdog for federal government agencies, including the SEC, is the Office of the Inspector General (“OIG”), which conducts audits and investigations of the SEC to “promote integrity, economy, efficiency, and effectiveness in the Commission's programs and operations.” In keeping with this mission, the OIG has issued its first audit report on the SEC Whistleblower Program. Fortunately, this report was overwhelmingly positive, confirming that the whistleblower program is off to a strong start. The OIG’s key findings included:
- The SEC Whistleblower Program rules are clearly defined and user-friendly;
- The SEC promptly reviews whistleblower submissions to determine whether further enforcement action is warranted;
- The funding mechanism for the Investor Protection Fund – the fund from which whistleblower awards are paid – is sufficient, and an appropriate balance of more than $450 million has been maintained in the fund; and
- The Freedom of Information Act (“FOIA”) exemption that helps the SEC protect the anonymity of whistleblowers is a vital feature of the program and should remain in effect.
These findings are especially significant because an OIG report is far from a “rubber stamp” of approval when it comes to whistleblower programs – to the contrary, past OIG reports sharply critiqued the OSHA whistleblower program and the SEC insider trading “bounty” program in place before the inception of the current whistleblower program. The fact that the SEC Whistleblower Program was able to earn such a positive report on its first try is an indicator both of the SEC’s commitment to the program, and the program’s effective leadership. That’s good news – not just for potential SEC whistleblowers, but for all of the investors who benefit when whistleblowers come forward to exposure fraud and wrongdoing.
- By Jordan Thomas and Vanessa De Simone