Compliance and internal audit personnel who are aware of FCPA violations or other securities violations committed by SEC-regulated companies may be eligible for a reward under the Dodd-Frank Reward Program. The Dodd-Frank Whistleblower Program allows compliance and internal audit personnel to obtain rewards under certain circumstances. The following are three ways compliance and internal audit personnel can obtain rewards for reporting securities violations:
- “You have a reasonable basis to believe that disclosure of the information to the Commission is necessary to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors[.]” This would apply if compliance or audit personnel became aware of a massive imminent fraud that is being undertaken by high-level executives.
- “You have a reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of the misconduct[.]” This would cover instances where compliance or audit personnel believe that employees may be destroying evidence of securities violations.
- “At least 120 days have elapsed since you provided the information to the relevant entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or your supervisor, or since you received the information, if you received it under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or your supervisor was already aware of the information.” This would apply to instances where 120 days have elapsed since a compliance officer had reported a securities violation to his or her supervisor. So if a compliance or audit employee reports to his or her supervisor an FCPA violation, then this information would be eligible for a reward if reported after 120 days have elapsed.
The SEC has paid compliance and internal audit whistleblowers. In April 2015, the SEC paid a compliance officer between $1.4 million and $1.6 million for blowing the whistle on corporate misconduct that could have caused substantial financial harm to the company. “When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”
In August 2014, the SEC made a whistleblower award to a corporate employee who performed audit and compliance functions and who had reported wrongdoing to the SEC after the company failed to take action. Employees who perform internal audit, compliance, and legal functions for companies often become aware of bribery, corruption, and fraud. These employees may be eligible for a Dodd-Frank Reward if their companies fail to take timely action on the violations that have been reported internally. “This particular whistleblower award recipient reported concerns of wrongdoing to appropriate personnel within the company, including a supervisor. But when the company took no action on the information within 120 days, the whistleblower reported the same information to the SEC. The information provided by the whistleblower led directly to an SEC enforcement action.”
*** *** ***
If anyone working in compliance or audit for an SEC-regulated company becomes aware of bribery, corruption, fraud, or other securities violations, then he or she may have a reward eligible case and should feel free to contact me for a free, confidential consultation. For more information and details about how whistleblowers can obtain rewards under the SEC’s program, please click here.