Client Alert
Comments on the Whistleblower Program of the Dodd-Frank Act
December 20, 2010
By
Kenneth M. Breen,
William F. Sullivan,
& Morgan J. MillerThe comment period prior to issuance of rules related to the Whistleblower Incentives and Protection Program (Whistleblower Program) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) ended on December 17, 2010. Over 250 companies and dozens of law firms, including Paul Hastings, submitted comments to the SEC concerning the proposed rules for the Whistleblower Program. Paul Hastings advocated for changes designed to strengthen internal reporting mechanisms, further corporate cooperation with the SEC, avoid undermining the benefits of internal investigations and the application of evidentiary privileges, and better align the new rules with existing federal employment statutes regarding whistleblower protections and obligations.
In anticipation of the implementation of the Whistleblower Program, companies must strengthen internal compliance programs to promote a culture of compliance from the top down, to make their reporting procedures more accessible to employees of good faith who want to use them, to protect privileged communications from misuse by putative whistleblowers, and to ensure credible reports or suspicions of misconduct are timely investigated and if substantiated, are remediated promptly. The timely documentation of employee performance problems is especially critical. The proposed regulations make clear that whistleblower status is conferred to a whistleblower even for a report of a potential violation, and the regulations leave questions unanswered about whether a whistleblower who personally engages in culpable conduct, but is not convicted of a crime, still holds protected status as a whistleblower, potentially rendering disciplinary action against the employee difficult.
We will continue to monitor and report developments in this area and remain available to assist you in modifying your compliance programs.
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