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Dodd-Frank Timeline, Whistleblower Provisions, CFTC
| Proposal Date
| Final Rule Issue
| Effective Date
|
| December 6, 2010
| August 4, 2011
| October 24, 2011
|
Dodd-Frank Timeline, Whistleblower Provisions of Secton 21F of the Securities Exchange Act of 1934
| Comment Deadline
| Final Rule Issue
| Effective Date
|
| December 17, 2010
| June 13, 2011
| August 12, 2011
|
Comment Letters addressing the establishment of whistleblower incentives and protection.
Contents
- 1 CFTC Commment Letters
- 2 SIFMA/FIA - February 3, 2011
- 3 American Institute of Certified Public Accountants - February 4, 2011
- 4 American Bar Association - February 4, 2011
- 5 Working Group of Commercial Energy Firms - February 4, 2011
- 6 Investment Company Institute - February 4, 2011
- 7 Financial Services Roundtable - February 4, 2011
- 8 SEC Comment Letters
- 9 Wells Fargo Advisors - December 17, 2010
- 10 Covington & Burling - February 18, 2011
- 11 SIFMA - December 17, 2010
- 12 Investment Company Institute - December 17, 2010
- 13 Financial Services Institute - December 17, 2010
- 14 North American Securities Administrators Association - March 23, 2011
- 15 National Whistleblowers Center - March 7, 2011
- 16 Center for Capital Markets Competitiveness - February 15, 2011
- 17 CFA Institute - January 18, 2011
- 18 American Bar Association - January 4, 2011
- 19 Center for Audit Quality - December 23, 2010
- 20 National Association of Criminal Defense Lawyers - December 17, 2010
- 21 References
|
CFTC Commment Letters
CFTC Whistleblower Provisions
February 3, 2011
In the comment letter, SIFMA and the FIA:
- believe that the Proposed Rules "do not go far enough to protect the critical role played by internal compliance reporting systems, and therefore weaken the overall system of prevention and detection;"
- agree with the CFTC’s proposal "to require individuals in legal, supervisory and other control functions to escalate potential violations through internal reporting lines;" and
- urge the CFTC to "harmonize its whistleblower rules with the efforts of the Securities and Exchange Commission (“SEC”) to encourage cooperation in enforcement matters."
CFTC Whistleblower Provisions
February 4, 2011
From the comment letter:
- "The AICPA urges that the final rules make it clear that CPAs and personnel of CPA firms that provide audit services to entities subject to CFTC jurisdiction are not eligible for whistleblowers awards."
- "[The] free flow of communication could be chilled if the CFTC creates a monetary incentive for individuals associated with CPA firms to disclose information received in the course of an audit or other engagement."
- "The AICPA is concerned that the 90-day “grace period” for employees and potential “credit” for first utilizing employer compliance processes will not sufficiently encourage potential whistleblowers to report first through a company’s internal reporting process."
CFTC Whistleblower Provisions
February 4, 2011
In the comment letter, which was submitted on behalf of the Committee on Derivatives and Futures Law and the Committee on Federal Regulation of Securities of the Section of Business Law of the American Bar Association, offered five principal policy recommendations for the CFTC regarding the implementation of whistleblower provisions:
- Coordinate the Commission Rules with that of the SEC so that, other than with respect to obvious statutory language differences, the two sets of Rules are virtually identical.
- Set minimum standards for whistleblower status, to encourage whistleblowers to provide the Commission high-quality information and to minimize false, spurious or frivolous claims;
- Refine the definitions of “voluntary”, “original information”, “independent knowledge” and “independent analysis” to help assure that only persons who should be entitled to awards receive them;
- Provide that persons who have engaged in culpable conduct would not be eligible for anti-retaliation protection or whistleblower awards; and
- Require, as a condition for receiving an award, absent extraordinary circumstances, that company employees pursue internal company whistleblower programs prior to submitting information to the Commission.
The letter concludes with a detailed discussion of each of the five points.
CFTC Whistleblower Provisions
February 4, 2011
From the comment letter:
- "As drafted, the Proposed Rule might encourage employees to allow misconduct to arise (instead of proactively preventing or mitigating it) in order to ensure they will qualify for an award."
- "The Proposed Rule should broaden the definition of “original information” to include information an employee provided to his or her company and that is later reported to the Commission by the company."
- "The proposed rule should require employees to first report potential violations internally as a prerequisite to entitlement to an award."
CFTC Whistleblower Provisions
February 4, 2011
From the comment letter:
"The Institute has very serious concerns about the unintended consequences that are likely to result from the manner in which the Commission has designed its proposed whistleblower program. Our concerns are focused primarily on three aspects of the program that will have the greatest adverse impact on our members: the program’s impact on internal compliance programs; the Commission’s
attempt to impose a new obligation on registrants to notify the Commission of all violations of the CEA, irrespective of how immaterial or technical in nature; and deficiencies in the criteria for rewarding whistleblowers. In addition, we recommend that the Commission refine the definition of “original information” and clarify the limits on the prohibition against employers retaliating against whistleblowers. Our concerns are discussed in more detail below."
CFTC Whistleblower Provisions
February 4, 2011
From the comment letter:
"While the Roundtable supports the Commission’s efforts to encourage those with information about possible corporate wrongdoing to make that information known, the Roundtable is concerned that:
- the Proposed Rules fail to place sufficient reliance on the effectiveness of the internal compliance procedures that so many companies, including our members, have established;
- the Proposed Rules will do damage to those efforts as employees and others with knowledge about possible violations of applicable laws, rules and regulations (referred to herein as “applicable law”) avoid even the most highly effective internal policies in order to preserve and protect the possibility, no matter how remote, of receiving large cash awards; and
- the Proposed Rules are similar to rules proposed recently by the SEC, but there are some significant differences and inconsistent terms that the CFTC and SEC should harmonize, so that companies will not be subject to potentially inconsistent requirements or otherwise led to assume inadvertently that they are in compliance with both regimes when, in fact, they are not fully compliant with one or the other."
SEC Whistleblower Provisions
December 17, 2010
A summary of the comment letter:
- "The proposed rules encourage individuals to bypass internal processes."
- "The proposed rules will undermine successful compliance systems."
- "Whistleblower rules will undermine existing SEC processes."
Wells Fargo makes distinctions between collecting whistleblower awards and providing original information protected by existing judicial or administrative orders, urging the SEC to deny or reduce awards for people involved in unlawful public disclosure.
SEC Whistleblower Provisions
February 18, 2011
Covington & Burling LLP represents the following organizations:
- Apache Corp.
- Cardinal Health Inc.
- The Goodyear Tire & Rubber Co.
- Hewlett-Packard Co.
- Merck & Co. Inc.
- Microsoft Corp.
- Newmont Mining Corp.
- Procter & Gamble Co.
- TRW Automotive Holdings Corp. and
- United Technologies Corp.
A summary of the comment letter:
- "Congress has granted the Commission broad authority to implement the whistleblower provisions of Section 21F."
- "The Commission has authority to make utilization of effective internal reporting procedures a prerequisite for whistleblower recovery."
SEC Whistleblower Provisions
December 17, 2010
A summary of the comment letter:
- "The proposed rule should require individuals to report violations internally to be eligible for an award."
- "For internal reporting and compliance systems to work effectively, the proposed rules should exclude from whistleblower eligibility legal staff, other control function staff and supervisory staff."
- "The proposed rules should be strengthened so that culpable individuals are not eligible for awards."
- "The Commission should harmonize its whistleblower rules with its cooperation initiative."
- "The Commission should incorporate reporting to SROs as part of the whistleblower rules."
- "The anti-retaliation rules should not protect individuals who engage in violations of law or who lie to the company."
SEC Whistleblower Provisions
December 17, 2010
The comment letter issues concerns and recommendations concerning the following topics:
- "the program's likely adverse impact on internal compliance programs;"
- "the program's attempt to impose new reporting obligations on registrants;"
- "deficiencies in the program's criteria for rewarding whistleblowers;" and
- additional topics concerning original information, prohibition against retaliation, foreign entities and non-federal government employees as whistleblowers."
SEC Whistleblower Provisions
December 17, 2010
From the comment letter:
"FSI is concemed about the potential impact the Proposed Rules may have on established compliance programs of lBDs and their potential to undermine an lBDs robust compliance efforts. Specifically, we believe that whistleblowers should have to report to the broker-dealer about potential securities violations prior to reporting to the SEC."
SEC Whistleblower Provisions
March 23, 2011
From the comment letter:
- "NASAA believes that in the case of referrals from a state securities regulator to the SEC, a different formula for calculating the deadline for the whistleblower to submit Forms TCR and WB-DEC to the Commission is needed."
- "To avoid this arbitrary distinction in the treatment of whistleblowers who provide information to state securities regulators, NASAA recommends that the Commission modify the proposed language of Rule 21F-4(b)(7)."
SEC Whistleblower Provisions
March 7, 2011
From the comment letter:
- "Employees who work for compliance departments, from the chief compliance offcer all the way down to a line-level auditor, must be fully protected against any form of retaliation for aggressively performing their functions, regardless the impact on a company's bottom line.
- Employees who provide information to compliance officials must be completely free from any form of retaliation or discrimination.
- All employees in regulated industries who perform compliance functions must be fully protected under the Dodd-Frank Act and permitted to file appropriate claims."
SEC Whistleblower Provisions
February 15, 2011
The comment letter suggests that the National Whistleblowers Center's data and methodology are questionable, encouraging a predetermination of SEC policy. Additionally, the CCMC states, "We believe that that the Commission’s rules should encourage whistleblowers to use a company’s internal compliance programs absent a well-founded reason for not doing so."
SEC Whistleblower Provisions
January 18, 2011
The comment letter indicates that certain provisions could make for an effective whistleblower program, like the one suggested by the SEC. These provisions include:
- "establish[ing] the proper process to sort out meritorious claims;"
- "recogniz[ing] the importance of honoring the internal compliance and reporting process in balancing the whistleblower incentives so as not to override what is a core corporate function;" and
- "offer[ing] legitimate whistleblower protection to those with the courage to step forward."
SEC Whistleblower Provisions
January 4, 2011
In the comment letter, the ABA recommends that the Commission should:
- "Set minimum standards for whistleblower status, to encourage whistleblowers to provide the Commission high-quality information and to minimize false, spurious or frivolous claims;
- Refine the definitions of 'voluntary,' 'original information,' 'independent knowledge' and 'independent analysis' to help assure that only persons who should be entitled to awards receive them;
- Provide that persons who have engaged in culpable conduct would not be eligible for anti-retaliation protection or whistleblower awards; and
- Require, as a condition for receiving an award, absent extraordinary circumstances, that company employees pursue internal company whistleblower programs prior to submitting information to the Commission."
SEC Whistleblower Provisions
December 23, 2010
In the letter, comments fall under the following categories:
- "Importance of requiring, at a minimum, concurrent whistleblower reporting to the Commission and the company as a condition to a whistleblower award;" and
- "Recommendations to clarify and expand exclusion of independent public accountants from whistleblower awards."
Specifically, "The CAQ believes that permitting awards to independent public accountants for such information in either scenario above would undermine a certified public accountant’s (CPA) duties of confidentiality and integrity and other ethical obligations, as well as undermine the candor among independent public accountants, the company and the audit committee."
SEC Whistleblower Provisions
December 17, 2010
From the comment letter:
- "The logical consequence of this policy will be (a) numerous, low quality referrals to the Commission (precisely what the Commission does not want), and (b) the evisceratation of the vital role that compliance officers, senior executives, and independent directors play in exercising their judgment about when to self-disclose."
- "Extending the window for an internal assessment to at least six months will not compromise the Commission’s ability to later enforce its laws as necessary in the event a corporation fails to respond appropriately."
- "NACDL proposes that the Commission require whistleblowers in the first instance to follow their entity’s internal reporting processes where a company has adopted a compliance program that meets the criteria for an effective compliance and ethics program as outlined by the United States Sentencing Commission at §8B2.1 of the United States Sentencing Guidelines."
- "An enhanced financial reward for a whistleblower who does not report internally first represents a gratuitous windfall. The rule as written will eviscerate the Commission’s stated intention of supporting corporate compliance mechanisms in the first instance."
References
