Thursday, November 17, 2016

More Proof SEC Dodd-Frank Whistleblower Program Is A Fraud,McKessy, Are Money Laundering U.S. Government Money Offshore

More Proof SEC Dodd-Frank Whistleblower Program Is A Fraud,McKessy, Are Money Laundering U.S. Government Money Offshore.Real whistleblowers are rarely anonymous and actually want to prove their cause or case publically.But even if EVERY whistleblower has approached the SEC has asked for anonymity it is absurd to extend such anonymity to the persons or corporations that thew whistleblower exposes !In effect the SEC's 'Whistlebloer' PROGRAM IS A HUGE FRAUD SENDING MONEY OFFSHORE TO ANONYMOUS INDIVIDUALS FOR 'BUSTING' Anonymous financial criminal companies or individuals.

SEC Whistleblower Program Delays: What You Need to Know

In its redacted report, the SEC bestowed this award on an anonymous whistleblower who reported an anonymous infraction at an anonymous company that is somehow subject to SEC requirements. As with past cases, the identity of the whistleblower and other facts are redacted. We know the whistleblower was living outside the U.S. and that, in the SEC’s opinion, he or she waited an unreasonable period of time to report the facts to the SEC causing continued harm to shareholders. We don’t know if the company had an internal reporting process in place or whether it was used. ..................

SEC's Secret $30 Million Whistleblower Case Won't Improve Corporate Behavior

I cover finance, the law, and how the two interact.  
Shanti Atkins
Harvard-educated former lawyer, founder and executive chairman of NAVEX Global, an ethics and compliance software provider.
This week, the U.S. Securities and Exchange Commission (SEC) captured headlines when it announced it is awarding a record $30 million to a whistleblower for reporting a major fraud. While I applaud the enforcement action, those of us in the risk and compliance profession are alarmed by how little we know about what must be an important case. It is all jaw-dropping announcement with no guidance or learnings for those organizations who want to get it right.
In its redacted report, the SEC bestowed this award on an anonymous whistleblower who reported an anonymous infraction at an anonymous company that is somehow subject to SEC requirements. As with past cases, the identity of the whistleblower and other facts are redacted. We know the whistleblower was living outside the U.S. and that, in the SEC’s opinion, he or she waited an unreasonable period of time to report the facts to the SEC causing continued harm to shareholders. We don’t know if the company had an internal reporting process in place or whether it was used. We don’t know if the company had any elements of an effective compliance program such as strong policies, role-relevant training, and auditing and monitoring for effectiveness and compliance. And, we don’t know the role of their external auditors.
All of this is relevant and critical information for in-house counsel and compliance and ethics professionals who are anxious for more specific guidance on what to include in their ethics and compliance programs to improve their effectiveness, and to ensure they meet regulatory expectations. Recent cases involving Morgan Stanley and Ralph Lauren resulted in declinations to prosecute and provided helpful detail on what is expected, and what will drive enforcement credits and kudos from the SEC.  When the SEC provides specific direction and guidelines s, companies take decisive action–and make strategic investments in compliance programs.
While the mega-millions-jackpot size of the award will inevitably incentivize whistleblowers around the world, as Sean McKessy, Chief of the SEC’s Office of the Whistleblower suggests, it doesn’t empower companies to become better.  And isn’t that the point of all this? It seems so misguided to make such a powerful statement that prompts more questions than it answers.
Instead, the SEC will have to contend with an even higher volume of tips submitted by bounty hunters. A higher volume of tips also increases the likelihood that many of these tips will be dead ends.  Does the SEC have adequate resources to deal with the inevitable uptick?
Sadly, this all leaves the business community and public wondering if the SEC is simply hunting for bigger prosecutions, or if they really want to better protect the public by increasing business integrity. The Office of the Whistleblower website says the value of the whistleblower is to, “…help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible. That allows the Commission to minimize the harm to investors…” I would argue that the SEC could dramatically increase the value of these validated tips by sharing lessons learned with the compliance community.
This is not only true in the U.S., but globally, where both anonymous whistleblowing and the legal landscape surrounding retaliation protections are developing rapidly.    The SEC’s award is effective advertising to employees around the world that the agency will pay a bounty to any person with good information (even non-employees like clients, vendors, suppliers and agents) and in any country, regardless of in-country laws surrounding anonymous reporting and the payment of bounties.  But again, it offers nothing to global companies trying to understand and effectively manage the scope of their risk.
Some might argue that disclosing more facts might chill the use of the whistleblower program. I would argue that the opposite is true, and that the positive benefits can be achieved without destroying faith in the SEC’s ability to safeguard the whistleblower’s desire for confidentiality.
In our work, we see some of the most advanced companies publicizing to all of their employees, sanitized versions of cases that have been reported internally.  Without revealing the identity of wrongdoers or victims, these disclosures send a powerful message to employees, letting them know that reporting is encouraged and applauded and there is zero tolerance for retaliation.  The transparency and open sharing of information helps to remove the shroud of mystery around the hotline/reporting and investigation procedure, and to show that the company takes action when it is alerted of potential wrongdoing.  These companies believe the risk of this “disclosure” is far outweighed by the reward—a true “speak-up” culture and an empowered group of employees who feel both confident in and obligated to be the eyes and ears of the organization.  These are not employees who when they suspect wrongdoing, immediately look to an external agency for help.
The whistleblower in this case should be protected and allowed to remain anonymous if that is what they choose. But the SEC going completely silent across the board in what is obviously a powerful case is going to do more harm than good.
Prosecution should serve as a deterrent in addition to serving justice. It should set an example for corporations who are striving for diligent behavior that serves their employees, their shareholders and the public and who want to improve their internal culture. In this case, we have no deterrent, and we have no guidance. This announcement has the same impact as publicizing a 99-year prison sentence without details of the crime or the laws broken.
Many companies, especially big ones, know they need to do a better job listening to their employees, especially when it comes to spotting malfeasance. And most understand that encouraging internal reporting is a good way to catch fraud early and root it out before it inflicts major damage. The SEC should be doing everything it can to help those companies do just that while still protecting the whistleblower. And it should start by coupling announcements like this week’s bombshell with relevant guidance that gives businesses a specific path to follow.

SEC Whistleblower Program Delays: What You Need to Know

Sam Kramer
USA December 21 2015
On Dec.10, an anonymous party filed an unusual petition with the U.S. Court of Appeals for the D.C. Circuit. It was a petition for a writ of mandamus requesting that the court order the Securities Exchange Commission (SEC) to rule on an anonymous whistleblower’s (“Anonymous’s”) claim for an award under the Commission’s Whistleblower Program, which was enacted in 2010 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. A writ of mandamus is a rare and dramatic intervention by a court into a government entity’s operations. Requesting such relief is typically reserved for situations in which a government agency has clearly refused to abide by the law. 
So what was the reason for this request for dramatic action? The answer is a delay of more than three years in the SEC’s disposition of Anonymous’s claim for an award resulting from a major backlog in unresolved claims for whistleblower awards.
Anonymous’s petition might be the canary in the coal mine for a potentially serious problem at the SEC’s Office of the Whistleblower (OWB). As the backlog of claims for whistleblower rewards grows at the OWB, whistleblowers who have provided vital information about serious wrongdoing – often at serious risk to their professional careers – are waiting much longer than they expected before collecting awards to which they may be entitled under the program. Should this problem persist, the Commission risks diminishing the incentive for SEC whistleblowers to step forward and help the SEC hold corporate wrongdoers accountable. 
About the SEC Whistleblower Rules
As part of the Dodd-Frank Act, Congress instructed the SEC to establish a whistleblower program that would reward individuals who provide information on SEC violations that lead to an enforcement action resulting in more than $1 million in monetary sanctions. Under the program established by the SEC, whistleblowers are eligible for between 10% and 30% of the amount the SEC collects, depending on the value of his or her contribution to the SEC’s investigation.
A typical SEC whistleblower tip follows a fairly straightforward process. First, the whistleblower submits a prescribed form containing information about an alleged securities violation to the OWB. Whistleblowers often submit anonymously, but some identify themselves in their submissions. After the form is submitted, the SEC may contact the whistleblower either directly or through counsel to follow up on the information provided. If the information submitted is actionable, the SEC may investigate further and possibly take an enforcement action. Upon the conclusion of any enforcement action resulting in monetary sanctions of more than $1 million, the SEC publishes a Notice of Covered Action (NOCA) to alert any potential whistleblowers to the possibility that they are eligible for a reward. 
When a whistleblower who submitted information to the OWB sees a NOCA indicating that the SEC acted on the information he or she submitted, he or she must submit an application for a reward within 90 days. The OWB reviews each such application to determine whether the applicant is entitled to a reward before issuing a preliminary determination as to whether the applicant should receive an award.
Playing the Waiting Game
It is this final stage of the process that led to Anonymous’s petition. Anonymous claims that he or she applied for a reward in October 2012 after seeing a NOCA referencing information Anonymous submitted to the OWB. Anonymous’s application has been pending before the OWB for more than three years without resolution. Understandably frustrated with a years-long delay in learning about their entitlement (or not) to a significant award, Anonymous took the SEC to court. According to the Wall Street Journal, no whistleblower has attempted this maneuver in the five-year history of the SEC Whistleblower Program.
Anonymous claims that his or her three-year wait for a preliminary determination is among the longest of any whistleblower in the program, but Anonymous is not the only one waiting for an answer from the SEC. In May, using information obtained through the Freedom of Information Act, the Wall Street Journal reported that of the 297 whistleblowers who applied for a reward following the issuance of a NOCA, 247 had not yet received a decision. That would mean that 83% of applicants were still waiting. The article does not break down the backlog by the length of time each applicant had waited, but the petition filed by Anonymous includes an analysis of publicly available data showing that the majority of applicants have waited for more than a year for the issuance of a preliminary determination. 
With whistleblowers waiting this long for a resolution, it was perhaps inevitable that somebody would eventually attempt an end-around to force the SEC to act more quickly.
Fallout from Lack of Funding
The SEC is in a difficult position in all of this. As the SEC’s enforcement director, Andrew Ceresney, told the Wall Street Journal, “[t]hese claims involve complex issues, many of which are being considered for the first time in the whistleblower program. We remain committed to ensuring the correct result for each claim and processing them as quickly as possible.” That is a labor-intensive process, especially in light of the fact that SEC staff review each award application thoroughly, whether meritorious or not.
Of course the SEC, like all federal agencies, has to operate within the budget Congress gives it. The backlog in claims for whistleblower awards is a clear indication that the SEC, and the OWB in particular, needs more resources. In FY 2015, for example, a budget shortfall resulted in the SEC having 272 fewer full-time employees than it requested. Shortfalls like that inevitably lead to backlogs, as we are now seeing with the claims for whistleblower awards. If Congress wants the whistleblower program to continue to succeed, adequately funding the SEC is a must. 
Katz, Marshall & Banks partner David J. Marshall, who regularly works with whistleblowers who submit SEC whistleblower tips, echoed these sentiments in comments he made to the National Law Journal, noting that “[T]imeliness is an important feature of the program . . . but the problem is that Congress and the SEC leadership need to make sure that the whistleblower program has enough staff to process the growing number of tips and award applications.” Mr. Marshall went on to explain that the number of award applications from whistleblowers has increased significantly in recent years, and the OWB “has not been able to ramp up its staff in the appropriate proportion.”
Even with Delays, the Program Works
As frustrating as these delays can be for whistleblowers, there is good news: The resolution is often worth the wait. The backlog aside, the SEC Whistleblower Program can and should be considered a rousing success for whistleblowers and the American public.
As of Nov. 16, 2015, the SEC had issued 17 awards to 22 whistleblowers. In FY 2015 alone, the SEC issued rewards totaling more than $37 million. Individual whistleblowers have been well compensated for their efforts, with one receiving a $30 million reward. These rewards are a byproduct of an increase in successful enforcement actions aimed at protecting the American public from securities fraud. 
Whistleblowers like Anonymous who are waiting for the OWB to make a preliminary determination are understandably frustrated by the delays, but that frustration is likely to seem like a distant memory if the SEC issues them significant rewards. Anonymous’s petition shines a light on a real concern within the program, and the court’s resolution of the petition is worth watching. But regardless of how the case is decided, whistleblowers still have many reasons to be encouraged by the OWB's management of the program thus far.

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