Monday, November 06, 2017

Enforcement forum participants discuss whistleblower developments

By Amanda Maine, J.D.

Jane Norberg, chief of the SEC’s Office of the Whistleblower, said that by the end of the 2016 fiscal year, her office had received more than 18,000 tips and expects to see an uptick in the number of tips for fiscal 2017. Norberg was a panelist on recent whistleblower issues at the Securities Docket’s annual enforcement forum.

Whistleblower award for government employee. Norberg was asked about a footnote in a recent whistleblower award order that stated that the award went to a government worker and how this could be reconciled with the prohibition on using one’s public office for private gain. Norberg, while stating that she could not provide confidential details on the award, assured that the government employee in this situation was covered under an exception. A member of the audience familiar with the case also spoke up, stating that the employee in question was not acting in his official capacity.

Circuit split on internal and external reporting. Panelists also discussed the implications of a federal circuit split on whether the Dodd-Frank Act’s whistleblower protections are available only to those who report misconduct to the SEC (Fifth Circuit) or whether they apply to both internal and external whistleblowers (Second and Ninth Circuits). The Supreme Court is set to hear arguments on November 28.

David Kornblau, formerly of the SEC’s Enforcement Division and currently a partner at Covington & Burling, explained that there will be risks for companies either way. He noted that the Chamber of Commerce has filed a brief siding with the Fifth Circuit interpretation, arguing that the more expansive interpretation would increase costs for companies. Kornblau also speculated whether requiring whistleblowers to first report wrongdoing to the SEC would be a disincentive to reporting their concerns within the company.

Norberg said that most whistleblowers are company insiders and that 80 percent of them reported the misconduct internally. If employees think they won’t be able to make a claim under the expanded Dodd-Frank whistleblower provisions without first reporting to the SEC, the likelihood of people reporting externally rather than internally will go up, she advised.

Phillips & Cohen partner Erika A. Kelton, who has extensive experience representing whistleblowers, said there needs to be a shift in corporate culture where employees are rewarded for reporting misconduct. Some companies may need to reconsider the structure of their incentive compensation policies to make sure that they are not unintentionally rewarding employees who do not report noncompliance.