Building a Solid Compliance Program


Research & Investigation Report: Learn from our experience

A new generation of whistleblowers?

The Securities and Exchange Commission (SEC) reported in 2016 that it handed out $57 million to whistleblowers, the largest total amount authorized since the Dodd-Frank Wall Street Reform and Consumer Protection Act passed.  Dodd-Frank confidentiality provisions prevent the disclosure of the identities of the award recipients, who may get up to 30% of the total monetary sanctions collected as part of the enforcement action.  So, how can employers avoid being the target of a government investigation stemming from a hotline call to the SEC?

With a record-setting $30 million award in 2016 going from the SEC to a whistleblowing employee working in a foreign country, the need for solid internal reporting is clear.  And so, a primary element of a tailor-made corporate compliance program is creating a standardized process for identifying and responding to potential violations by having a state-of-the-art hotline program. 

How does an organization take a hotline program and make it better?  First, senior executives are responsible for setting a “tone at the top,” encouraging employees to make use of internal reporting systems.  Next, training is paramount.  Employers should ensure that employees know the company’s code of conduct and how to use the company hotline to report suspected problems, whether involving a violation of the code or a violation of a law.

Why use internal reporting, and how?

Employers should make clear that employees and vendors should report concerns; it is also beneficial to establish a system in which tips and complaints can be prioritized based on the apparent magnitude of risk.  But each allegation must be treated seriously, and addressed promptly.  But most importantly, employees must understand when to use the company hotline, and be encouraged to do so. 

Employers that have hotlines must finally appreciate that no or few calls to a hotline doesn’t mean that there are no problems.  In fact, it is a red flag when hotlines are underutilized, as it means employees don’t understand how or when to make a call; are afraid to make call; or have made previous calls that were ignored.

Using internal reporting systems to avoid government regulatory actions from the SEC and other government agencies is an important component of developing a solid compliance program. Let us know if we can help.

About the Research & Investigation Report 

This new series provides a monthly report from Andrew J. Collins, Research & Investigation Manager. Collins conducts transnational and domestic due diligence, fraud investigations and competitive intelligence projects. In addition, he works with global organizations to provide compliance services, as well as intellectual property investigations, forensic accounting and litigation support. Recent projects include asset searches in the Ukraine and Russia, investigations of corruption and bribery in China, and discreet patent infringement investigations.

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