Not Fundamentally Designed to be Successful
“Not fundamentally designed to be successful.” That’s what the Inspector General’s Office had to say in its March 2010 Assessment of the SEC’s Bounty Program. OIG identified problems with the program when it released its August Report on the “Investigation of Failure of the SEC to Uncover Bernie Madoff’s Ponzi Scheme.” The latest report details the follow up investigation of the SEC’s whistleblower program.
According to the OIG report, the SEC has had its bounty program in place for more than 20 years. The program provides for rewards to whistleblowers for reporting insider trading. The OIG found that the program was not recognized inside or outside of the SEC and that few applications had ever been received by the program.
Many of the recommendations that followed the OIG’s findings appeared to basic, common sense management practices. For example, one recommendation is to keep some kind of file, whether it be hard copy or electronic, for each bounty application. The file, according to the OIG report, should contain, at minimum:
• The bounty application
• Any correspondence with the whistleblower
• Documentation of how the whistleblower’s information was utilized
• Documentation regarding any significant decisions made with regard to the claim
A bit of a concern is the recommendation that the SEC Bounty Program should incorporate “best practices” from the IRS Whistleblower Rewards Program. One hopes that that new SEC program would incorporate ideas from the latest incarnation of the tax fraud program under Director Stephen Whitlock and eschew past versions. Prior to Whitlock’s leadership, the tax reward program showed similar problems to those currently capturing the attention of SEC watchers. While much improved in the last few years, the Service is still struggling to find lost complaints and improve communication with whistleblowers.
The SEC is charged with providing OIG with a written corrective action plan designed to address the recommendations. The plan should appear in late May.
This entry was posted on Friday, April 9th, 2010 at 11:38 am and is filed under SEC Whistleblower Program. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.