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SEC Whistles for Better Whistleblower Hotlines

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SEC Whistles for Better Whistleblower Hotlines

With more than a year under its belt, the Securities and Exchange Commission’s awards program for corporate whistleblowers saw just over 3,000 reports in its first fiscal year. Contrary to popular belief, whistleblowers were not lured away from internal reporting by monetary awards.

This is due in part to organizations beefing up their communications and education with employees, making sure they were aware of the internal reporting mechanisms available. Secondly, organizations strengthened their investigative processes and began circling back with whistleblowers to provide transparency to the reporting process and status of the individual claim.

Historically, whistleblowers would submit a report and not hear any feedback on what came of the information. The radio silence did not inspire further whistleblowers internal reporting. Organizations have begun using a more dynamic reporting follow-up process to let employees know their voice is being heard. And it’s working.

A case in point where proper reporting procedures were not followed involves Dr. Eric Ben-Artzi, a former quantitative risk analyst for Deutsche Bank, who followed internal reporting protocols to call attention to a multibillion-dollar securities violation. Rather than being thanked for his honesty, Ben-Artzi was met with hostility and was subsequently fired without just cause. With nowhere to turn, Ben-Artzi is now suing Deutsche Bank, and reporting via the SEC Whistleblower Hotline program.

Luckily, stories like these are the exception to the rule. Internal compliance and reporting remains sacred at most organizations. Employers who encourage employees to report wrongdoing internally must be prepared for what may surface as a result. Keeping employees in the loop on resulting investigations lends credibility to your processes and keeps your watchdogs on guard. A third party whistleblower hotline further lends credibility to your cause.

Savvy organizations are taking a proactive approach to ensuring employees are aware of the rules and expectations. Using technology to manage internal compliance processes is an effective measure and one that is certainly less expensive than a lawsuit.

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