As a public company executive officer or general counsel, how should you deal with a disgruntled employee who is or could be an award-seeking SEC whistleblower? The short answer is, of course, very carefully. For the longer answer, read on.

  1. Asses the Risk: Before making adverse personnel decisions, assess the risk that the adverse action would be considered retaliatory. Consider seeking advice from expert outside counsel before you act.
  2. Keep Communication to a Minimum: Avoid unnecessary non-privileged oral and written communications relating to complainants.
  3. Investigate Right Away: Ensure that the allegations are investigated promptly by persons with sufficient objectivity and expertise, unless it would be clear to a neutral arbiter that the allegations do not warrant investigation.
  4. Understand the Government’s POV: Realize that while you might think the government will entirely discount the complainant’s allegations when the complainant has “issues,” the government will focus on the information provided by the complainant.
  5. Set the Tone: Be prepared to demonstrate to the government that your company has the proper “tone at the top,” including a compliance and ethics program that is tailored to the company’s risks, applied in good faith and effective.
    • Do you have anonymous hotlines (in countries where legally permitted, such as the US)?
    • Do you make clear to employees and third parties that there is a mechanism for reporting suspected or actual misconduct confidentially and without fear of retaliation?
    • Do you have in place a process for investigating allegations and documenting the company’s response, including any disciplinary or remediation measures taken?
    • Do you review and update your code of conduct periodically, and is it available in all necessary languages?
    • Does your company provide sufficient compliance training?
    • Does your company provide incentives for employees and managers related to ethics and compliance?
    • Have you considered the potential benefits of periodically informing employees of the SEC whistleblower awards program and the incentives it provides for internal reporting?
  6. Stay Above Board: Do not take prohibited actions or actions that will cause the SEC to assume that you have the wrong attitude.
    • Have you taken any action to impede a whistleblower from communicating directly with the Commission about a possible securities law violation, including by enforcing or threatening to enforce a confidentiality agreement? Such actions are prohibited by SEC rule.
    • Does your code of conduct expressly require employees to report internally before reporting to US regulators?
    • Have you asked or required employees to waive or limit their Dodd-Frank antiretaliation rights?