Whistleblower Ruling Could Boost Compliance Costs

Agenda (Financial Times Service)
March 12, 2018

Jordan A. Thomas discusses the U.S. Supreme Court’s effect on internal compliance programs

A recent U.S. Supreme Court ruling has companies taking a closer look at their anti-retaliation policies, for it may become more attractive for whistleblowers to bypass internal reporting and address the Securities and Exchange Commission directly.

Jordan Thomas, former Assistant Director in the SEC’s Enforcement Division and current chair of Labaton Sucharow LLP’s SEC Whistleblower Practice, said “the problem for responsible organizations is that even if they have the very best internal reporting and compliance systems, sophisticated whistleblowers may fear retaliation and blacklisting.”

Dodd-Frank defines a whistleblower as a person who reports a violation “to the Commission,” and their decision is “unfortunate because internal reporting and compliance systems play an important role as a frontline defense for investors, and now that defense has been weakened.”

Labaton Sucharow describes itself as an “advocate” for SEC whistleblowers, and Thomas is described by the firm as a “principal architect” of the SEC’s whistleblower program while he worked at the agency.  Despite the SEC’s recommendation regarding the effectiveness of internal protocols, Thomas believes the high court has created a new tension for companies.

In closing, while Thomas doesn’t think the decision will render internal systems useless, he does believe that “companies are going to have to do more work [in promoting them as] best practice.”