• SEC Enforcement Official Recommends That Firms Showcase Their Compliance Programs
  • September 27, 2013 | Authors: Noa M. Baddish; Sigal P. Mandelker; Steven J. Pearlman
  • Law Firms: Proskauer Rose LLP - New York Office ; Proskauer Rose LLP - Chicago Office
  • Stephen Cohen, Associate Director in the Securities and Exchange Commission’s (SEC) Enforcement Division, recently advised companies being investigated to flaunt their compliance programs to the agency, according to an article in the Wall Street Journal (subscription required). More specifically, while speaking on a panel at the 2013 Corporate Whistleblowing Forum, Mr. Cohen suggested that companies would benefit during investigations if they demonstrate a strong internal compliance program and a culture of compliance and ethics. Officials from the Justice Department and Commodity Futures Trading Commission, who also spoke on the panel, agreed and reiterated that companies may garner goodwill if they are forthcoming with information and proactive when problems arise. 

    The panelists also addressed the SEC’s whistleblower bounty program. Though the SEC Office of the Whistleblower has issued just two awards thus far, it was noted that the companies in both cases had little or no ability to pay, which ultimately served to reduce the size of the pay-outs to the tipsters. In addition, Mr. Cohen noted that this year the SEC Office of the Whistleblower received a comparable number of tips as it did last year (~3,000). He also stressed that the tips primarily related to securities laws, rather than human resources issues and petty theft.

    Mr. Cohen’s comments send the message that the SEC Office of the Whistleblower remains active and vigilant, and underscore the value of demonstrating the scope, functioning and effectiveness of corporate compliance programs during SEC investigations. So, how can this be accomplished? For starters, companies should focus on demonstrating: thorough and widely disseminated policies and up-to-date codes of conduct; robust training for all levels of employees; an appropriate tone at the top and in the middle with respect to ethics and compliance; rigorous audit protocols and processes; triage and escalation processes; and structures to ensure that the audit committee, chief compliance officer, and compliance committees are fully informed and appropriately empowered. Doing so is a step in the right direction towards garnering credibility and goodwill with the government when investigations arise.