Reform reading: Whistling to the SEC

Introduction

Whistleblowers will be front and center at the Securities and Exchange Commission’s meeting tomorrow. Corporate lobbyists are likely to try and narrow whatever regulation the agency proposes for whistleblowers, who are supposed to receive up to 30 percent of sanctions over $1 million, under the Dodd-Frank law, according to Corporate Secretary’s Elizabeth Judd. She quotes Steven Berk of the Corporate Observer blog saying that the SEC’s proposed regulations will also stir discussion over whether any corporate misconduct – including bribes to overseas officials or environmental negligence – could be covered by the whistleblower regulations.

Law firms gear up for more whistleblowers

Companies are already worrying about whether the generous bounty offered to whistleblowers will tempt some to make up claims. Several law firms that represent plaintiffs – including one with the aptly named website www.secsnitch.com — say they are getting lots of calls from would-be whistleblowers, reports Sue Reisinger of Corporate Counsel. Lawyers for corporations say a generous reward, longer statutes of limitations, the right to jury trial, a ban on arbitration agreements, and the right to remain anonymous are certain to encourage more litigation by whistleblowing employees.

SEC reports to Congress on whistleblower program

The SEC has set up its new whistleblower office with an eye-popping fund of $452 million, according to the agency’s first annual report to Congress on the whistleblower program. The money will be invested in short-term Treasury securities with the interest generated used to pay whistleblowers. The 18-page report also says that the SEC has already advertised for a senior officer to head the office and is in evaluating applicants “with a selection expected in the near future.”

CFTC and SEC enforcement

The Commodity Futures Trading Commission, long in the shadow of the Securities and Exchange Commission, gets the power under the Dodd-Frank law to police the same kind of fraud in commodities and futures markets as the SEC has for securities fraud. DealBook’s Peter Henning says the CFTC’s proposed Rule 180.1 to prevent market manipulation is patterned after the SEC’s Rule 10b-5 that has been used to prosecute insider trading and Ponzi schemes.

How do the two agencies compare in other ways? The CFTC had an enforcement budget of about $60 million and a staff of 200 employees for fiscal 2010, compared to the SEC’s policing budget of $350 million and nearly 1,200 enforcement staff.