Conclusion from Fried Frank memorandum Living with the SEC’s Whistleblower Rules

The new whistleblower rules underscore the importance of companies revisiting their internal reporting requirements to ensure that sufficient measures are in place for a person to report wrongful conduct, without fear of retaliation. Having a strong internal reporting system in place may encourage individuals to utilize internal reporting mechanisms prior to reporting to the SEC. Companies may also want to consider adopting their own incentive programs to encourage individuals to remain vigilant and attentive to wrongful conduct. Nevertheless, just as compliance personnel are beginning to get a handle on the Final Rules, Congress has already held a hearing about amendments to the Dodd-Frank Act’s whistleblower provision.

During that hearing, Representative Michael Grimm of New York introduced a proposed bill that would, among other things, require whistleblowers to first report possible securities law violations internally. In any case, as the scope and protections of the new whistleblower program are tested in the coming years, companies should be prepared to handle what may turn out to be an influx of tips as a result of its implementation.

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