United States: SEC, CFTC And OSHA Officials Offer Candid Insights Into Whistleblower Programs' Results, Priorities, And Future Directions

Authored by Mike Delikat, Renee Phillips and Michael Disotell

On June 28, 2017, three prominent whistleblower law regulators spoke at PLI's Corporate Whistleblowing in 2017, which was co-chaired by Orrick partners Mike Delikat and Renee Phillips. With the standard disclaimer that their comments and opinions were their own and not the official comments of their respective agencies, each spoke candidly about their agencies' whistleblower program's progress, challenges, and priorities.

SEC's Office of the Whistleblower

The Chief of the SEC's Office of the Whistleblower ("OWB"), Jane Norberg, kicked off the panel with her views on the current status and priorities of the OWB in the new administration: "From my point of view, the SEC's whistleblower program is open for business and we are moving forward as we have in the past." She elaborated on the program's results to date, noting that the Commission has received over 18,000 tips and awarded over $154 million to 44 tipsters, reflecting over $1 billion recovered through the SEC's enforcement actions and related actions arising from whistleblower tips. Norberg explained, "the real value of the program comes from individuals who help prevent ongoing fraud at a company while also giving victims a chance to recover some of what they lost."

She then discussed how whistleblower protection remains a top priority for her agency; as a result, the OWB will continue to focus its efforts on investigating claims of employee retaliation and employers' attempts to chill reporting through severance agreements and other employee compliance requirements. "It's very important to my office that whistleblowers feel they can voluntarily report to the Commission," she said. To date, the OWB has brought nine enforcement actions against employers over what it viewed as overly restrictive employment agreements pursuant to Rule 21F-17a. When asked whether the SEC takes the position that the Rule covers non-US employment agreements, Norberg offered little solace to employers, responding that it would depend on the facts and circumstances of the case.

Norberg then weighed in on the recent circuit split regarding whether Dodd-Frank's anti-retaliation provisions apply to whistleblowers who report internally or only to the SEC, an issue recently accepted for review by the Supreme Court. Norberg explained the SEC's long-standing position that internal reporting is protected under the provision. "In my view, any other reading would be completely inconsistent with the incentives that the Commission put in place to encourage internal reporting." Norberg suggested that it was ironic that many of the companies who commented in favor of internal reporting during the initial rulemaking process were now opposing a broad reading of Dodd-Frank. She cautioned, "If this goes the way that I think a lot of companies want it to go, then the very first time companies hear about a securities violation may be when the SEC knocks on their door."

CFTC's Whistleblower Office

Also on the panel was Christopher Ehrman, the Director of the CFTC's Whistleblower Office, who stated that "like the SEC, the CFTC's Whistleblower Office is also open for business." Ehrman explained that his office has been growing rapidly, and he anticipates hiring a new deputy next month. He stated, "We have seen an increase in not only the quantity of tips we receive, but the quality of tips as well. And these have come from all parts of the marketplace and sectors. I am confident that this is going to be a very strong year for the Commission and our program in particular."

Ehrman then provided insights into the significant rule changes that the CFTC is currently spreading awareness of, and which go into effect on July 31, 2017. He explained that the enhanced protections and revised claims review process are "meant to mirror those of the SEC." For instance, the new CFTC rules will be the same as the SEC's in terms of prohibiting agreements that chill employee reporting to the Commission. In addition, retaliation against an employee will now be viewed as a violation of the Commodity Exchange Act such that the CFTC could bring an enforcement action against the employer. Ehrman explained that the CFTC will be implementing a revised claims review process that will "provide more transparency early on so that a whistleblower can review the claims staff's record and revise any inaccuracies in it instead of having to fix it in the appellate sphere." When asked whether the new regulations would have a retroactive effect, Ehrman responded: "We are still considering our position and has not yet reached a definitive answer. We when decide, though, we will let everyone know."

In response to audience questions, Ehrman discussed the open sharing of information between the SEC and CFTC. He explained that "many tipsters report to other agencies first without even knowing we have jurisdiction over their complaint." He added that the CFTC typically does not share whistleblower information with other agencies due to confidentiality concerns but instead invites the individual to share information with the other government agency.

OSHA's Whistleblower Program

Next, Teri Wigger, Assistant Regional Administrator for OSHA Region 2 (covering New York, New Jersey, Puerto Rico, and the Virgin Islands), spoke about how OSHA – which has jurisdiction for whistleblower protection under 22 separate statutes – has worked hard to improve its investigation time for claims, and noted that most claims are now investigated within one year. "We are also working on developing a reasonableness standard for the length of time within which investigations should be completed," she added.

Wigger elaborated on how OSHA has actively sought to increase its cooperation and information-sharing with other government regulators, noting that the agency has gone so far as to add this as a line-item on its latest budget proposal. When asked whether information OSHA shares with other agencies is considered "original information," for purposes of an SEC bounty claim, Norberg stepped in to offer her perspective. Norberg said: "The SEC would consider the information 'original' for the purposes of initiating an enforcement action and providing anti-retaliation protection, but the individual would also need to file a tip on a Form TCR to receive any subsequent bounty award."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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