Opposing advocacy groups have unleashed new demands on the Securities and Exchange Commission in recent weeks, urging the agency to pay more attention to potential problems associated with new whistleblower rules.

The groups’ concerns stem from new rules created through the enactment of the Dodd-Frank Financial Reform Bill earlier this year. The new legislation has expanded existing whistleblower rules from just insider trading to a broad range of activities at both public and private firms. At the same time, the legislation also sweetened the financial incentive for those raising concerns, with the potential to reap from 10% to 30% of penalties of $1 million or more.

This week, a group of consumer and workplace advocacy groups sent a letter to the SEC urging that the agency work to better utilize information from whistleblowers and resources from other agencies during an investigation. That letter also urged the agency to steer away from letting internal corporate compliance departments oversee potential violations, as company officers could have played a part in the alleged actions.

The letter, dated Dec. 17, came from organizations including Change to Win, Government Accountability Project, National Employment Lawyers Association and Voices for Corporate Responsibility, among others.

“If you have a scheme where the company is booking massive amounts of illegal revenue, reporting that internally isn’t going to help when the highest levels are making $5 [million] or $10 million bonuses. There’s an inherent conflict,” said Reuben Guttman, partner at Grant & Eisenhofer PA and co-founder of Voices for Corporate Responsibility. “In those types of situations, there’s no question that you need an outside agency to deal with the issue.”

Whistleblower claims could also overlap different agencies, Guttman said, such as possible illegal off label marketing of a drug that could be a violation of the Food, Drug and Cosmetics Act and also be a violation with the SEC. If the agencies were to better work together on these claims, that could make them more efficient, he said.

That advocacy letter counters the reaction of another group, comprised of more than 260 companies organized by the Association of Corporate Counsel, which sent its own letter to the SEC last week. That group argued in its letter that new rules create an outsize financial reward for whistleblowers and less incentive to help stop internal corporate deviance.

Among the companies signing that letter were Delta Air Lines Inc., Gap Inc., GlaxoSmithKline PLC, FedEx Corp., McDonald’s Corp., Nike Inc. and Time Warner Inc.

Regardless of bounty incentives, Guttman said, whistleblowers will not reap any reward unless there is actual wrongdoing. And, after working with whistleblowers for more than 20 years through his practice, Guttman said it is not easy for them to come forward. “People don’t like to blow the whistle,” Guttman said. “They don’t want to go through the trauma of turning against their employer. That’s tantamount to the trauma of having a divorce or separating from your family. That’s just a very traumatic thing.

The Association of Corporate Counsel did not return a call for comment by press time.

The next step is for the SEC to consider the records, which could lead to a revised or final rule or appeal. “We look forward to receiving and considering the public’s comments,” said SEC spokesman John Heine, who declined to elaborate.

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