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Volume 32, Issue 2

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Wednesday, 10 April 2019 14:37

How Does a Compliance Officer Blow the Whistle – And What Happens Then?

Compliance officers eligible to participate in the SEC and CFTC whistleblower programs must navigate strict rules. Speaking up always carries risk, but – as Michael Filoromo and Zac Arbitman explain – the SEC, CFTC and various federal and state laws protect whistleblowers from retaliation.

The first article in this series provided an overview of the whistleblower award programs established by the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) and the eligibility criteria for compliance personnel to serve as SEC or CFTC whistleblowers. This article outlines the steps involved in submitting tips and claiming awards, as well as the anti-retaliation protections available to whistleblowers who speak up about wrongdoing.

Procedures for Submitting a Tip

To submit a claim under the SEC and CFTC whistleblower programs, an individual must file a tip, complaint or referral (TCR) form detailing their allegations. When preparing tips for submission to the SEC or CFTC, whistleblowers and their counsel should make sure that the TCR form and accompanying exhibits present the most comprehensive and compelling evidence. With the SEC and CFTC receiving a steadily increasing number of tips – 5,200 in 2018 alone – it is important that a first read of a whistleblower tip provide agency staff with a sound understanding of the alleged violations and, to the extent possible, a roadmap to investigate and prove the wrongdoing.

Whistleblowers should describe in detail the particular practices and transactions they believe to be unlawful, identify the individuals and entities that participated in or directed the misconduct and provide a well-organized presentation of whatever supporting evidence the whistleblower possesses. Under no circumstances, however, should whistleblowers give the SEC or CFTC information that is protected by attorney-client privilege, as the agencies cannot use privileged information in an investigation or enforcement action. The mere receipt of such information can interfere with and significantly delay the staff’s ability to proceed. This is a particularly important consideration for compliance personnel, who often work and communicate with in-house and external counsel.