Whistleblower
Section 806: Protection for Whistleblowers
Does the Whistleblower reward program bypass and undermine internal reporting in favor of an SEC Payout?
Sarbanes Oxley Section 806 encourages the exposure of fraud by publicly traded companies, its subsidiaries, and private contractors by the employees of said companies. If certain fraud information were to be disclosed to an appropriate superior, federal regulatory or law enforcement agency for investigation, any retaliation by the employer may be subject to criminal charges by the Department of Justice. Certain relief may be recovered by the employee as well as compensatory damages.
No covered company can be involved in a wrongful termination, demotion, suspension, harassment, transferring of employees, exposure of a whistleblower or in any other manner discriminate against an employee because of any lawful act done (reporting) by the employee.
There has been an evolution of whistleblower protections. First from a backlash of narrow interpretations to the expansion of who and what is covered in the scope of a whistleblower claim. There has been an increase in fraud reports to the SEC when Congress included a whistleblower reward program in the Dodd-Frank Act. Some people think the reports have increased due to bounty hunters in search of a big payout. Others think the increase is due to the requirement to report to the SEC to enjoy whistleblower protection.
It is clear that the whistleblower reports have increased and the SEC has recovered more than a billion dollars in fines. The SEC has also made record payouts to whistleblowers in the amount of 154 million. It is easy to think that bounty “tipsters” could be looking for there next payout. However, the reward program incentivizes the whistleblowers to report violations internally prior to reporting to the SEC by potentially increasing their payout if done so in that order.
Does the whistleblower reward program incentivize payouts over internal controls for correction? Are employees looking for a payout rather than fix the errors or mistakes made by the company? One thing is clear, the number of reports and payouts keep increasing.
http://www.sox-online.com/key-sections/section-806-whistleblower-protection/
https://www.justia.com/employment/retaliation/sarbanes-oxley-act/
https://www.forbes.com/sites/realspin/2017/07/18/one-billion-reasons-why-the-sec-whistleblower-reward-program-is-effective/#37d5925c3009
https://www.kiplinger.com/article/business/T012-C000-S002-high-costs-of-being-a-whistleblower.html