Skip to content

Editors

Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Compliance Wasn’t Broke, Still Gets Fixed

Next week the World Compliance FCPA Tour, which we’re pleased to be a part of, will be in Colombia — Bogota, Barranquilla, and Medellin — hosted there by AmCham.

The tour kicked off last week in Houston, and after Colombia will continue in Palo Alto, Washington, D.C., New York, and Boston.

We always enjoy talking about the FCPA and laws like it. It’s a chance to hear what’s on people’s minds.

Causing the most concern right now for issuers is the Dodd-Frank SEC whistleblower rule for potential FCPA violations. The proposed rule, available here, was issued a few months ago and is in force; the final rule is due out next month.

The concern about the rule is understandable. In November, TI-USA’s Shruti Shah and Rob Walton talked in this space about the risk of the SEC’s whistleblower reward program bypassing existing corporate compliance processes for internal reporting.

Over the past couple of weeks, professionals already helping companies deal with complaints made to the SEC — which consist of lawyer’s letters from 30 to 40 pages long — have painted a grim picture. The reward program is cutting off internal reporting, the professionals have said. Responding to the SEC about the complaints is diverting time, attention, and money away from existing compliance programs. And companies are being forced to create a parallel mechanism  — which may become permanent — to deal with the complaints and responses to them. 

Experts warned the SEC that compliance programs that were years in the making would suffer when corporate resources were diverted by the whistleblower reward program. Although that’s already happening, the SEC is moving ahead with the rule as proposed.

This week, Robert Khuzami, the director of the SEC’s enforcement division, told a gathering of compliance professionals in Phoenix that the SEC has “received and studied many comments to the proposed rule, and adoption of the rule is set for April.”

He continued:

The proposed rule has provoked some passionate views, particularly on the issue of the role of internal corporate compliance programs. In the proposed rule, we have worked hard to strike the right balance between incentivizing and protecting whistleblowers who want to report suspected misconduct, but at the same time acknowledging the value and obligation of corporate compliance programs to identify and remediate misconduct in the company’s operations. We look forward to implementing the whistleblower program in a way that factors in the important role of corporate compliance programs while providing whistleblowers a direct path to the SEC in appropriate circumstances.

Not much comfort from Mr. Khuzami. Issuers will now be burdened with diverting and expensive response drills to SEC whistleblower complaints.

Corporate resources would be better used for making sure compliance programs meet the requirements set out years ago by the DOJ, SEC, and the U.S. Sentencing Commission. 

Share this post

LinkedIn
Facebook
Twitter

Comments are closed for this article!