Rise in SEC Whistleblower Complaints Reinforces Importance of Corporate Compliance

The Co-Director of the U.S. Securities and Exchange Commission’s (“SEC”) Enforcement Division, Steven Peiken, recently announced the SEC received about 4,000 tips, complaints, and referrals of possible corporate wrongdoing from mid-March to mid-May—35% higher than the same period last year. These tips have led to hundreds of new investigations, both COVID-19 related and in other traditional enforcement areas.

This announcement, coupled with the SEC and Department of Justice (“DOJ”) statements during the recent virtual town hall that the agencies continue to pursue new and existing investigations, is a reminder that companies should continue to prioritize compliance even during the pandemic. The SEC and DOJ expect companies to follow best practices around handling whistleblower complaints, which can include processes to ensure whistleblower complaints are appropriately reviewed and adequately addressed, whistleblowers are protected, and necessary remedial actions are taken.

Companies should be particularly mindful that during times of workforce reductions and furloughs, it may be more challenging to identify whistleblower complaints. However, having protocols for doing so—including effective exit interviews and monitoring complaint hotlines—can be even more important. Indeed, DOJ recently updated its corporate compliance guidance (which we will cover in a separate alert) to include an assessment of the company’s efforts to test whether employees are aware of the hotline and feel comfortable using it and whether the company periodically tests its effectiveness. We strongly recommend companies revisit their existing whistleblower procedures to ensure they are still aligned to underlying risk-based compliance priorities—even if the compliance, human resources, and financial department functions may have undergone changes due to COVID-19.

The rise in whistleblower complaints is also particularly salient given the current remote workplace environment, which presents additional risks for corporate wrongdoing by employees who may perceive that they are subject to reduced oversight. The uptick in whistleblower complaints suggests that, while some employees may be more inclined to engage in misconduct during the pandemic, others may be more inclined to report that misconduct.

Should you have any questions or concerns, including with respect to responding to whistleblower complaints, please do not hesitate to contact Ice Miller’s White Collar Defense & Investigations Group for assistance.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.