The Association of Corporate Counsel (ACC) strongly disagrees with the Securities and Exchange Commission's (SEC) ruling that bypasses internal compliance and reporting systems in favor of permitting tips from prospective whistleblowers to be submitted directly to the SEC.
"The SEC's bounty rule is a Pandora's box that, when opened, is likely to create new and even unanticipated harms rather than promoting better reporting of potential problems.Once the floodgates are open, we question whether the SEC even has the capacity to handle a torrent of new reports," states ACC's senior vice president and general counsel Susan Hackett. "Listening to the SEC staff's overview of the rule today, we are unclear if they understand what the impact of this rule will be. They are assuming that offering whistleblowers money to come forward will yield better results without imposing disproportionate costs for companies, shareholders and the very compliance programs that ACC members have spent decades building."
ACC's associate general counsel Amar D. Sarwal explains, "As Commissioners Casey and Paredes noted today, the final SEC rules undermine internal compliance programs by preventing companies from addressing festering allegations of misconduct." Mr. Sarwal adds, "We plan to study the technical details of the final rule to see whether it addresses our concerns, ranging from the potential rewarding of wrongdoers and benefits to short sellers to possible violations of already-existing legal ethics rules.In the immediate future, we will continue to work with our chief legal officers and general counsel members on compliance processes and best practices to ensure that SEC officials are aware of issues that may arise in the coming months."