Learning a lesson from recent securities scandals, FINRA has established a new Office of the Whistleblower to expedite senior FINRA staff review of high-risk tips and to ensure a rapid response for tips believed to have merit. This whistleblower initiative enhances, rather than replaces, FINRA’s existing processes for handling routine regulatory tips and customer complaints.
Through the Office of the Whistleblower, individuals with evidence of, or material information about, potentially illegal or unethical activity can contact FINRA’s senior staff by telephone (1-866-96-FINRA) or by email (firstname.lastname@example.org). Any whistleblower tips that fall outside FINRA’s jurisdictional reach will be referred to the appropriate regulatory or law enforcement agencies.
Meanwhile, the SEC also is taking steps to improve the efficiency, effectiveness, and overall management of how the agency addresses whistleblower tips, complaints, and referrals, and how its staff uses the information received to protect investors. The SEC has retained a federally-funded research and development center to review the agency’s internal procedures for evaluating whistleblower tips, complaints, and referrals.
Also, although in the early stages, there has been active discussion within the SEC about whether to broaden the whistleblower statutes so as to allow (among other things) monetary reward for tips. SEC Chair Schapiro has cited the Internal Revenue Service’s whistleblower scheme as a potential model. According to Schapiro, the SEC receives between 750,000 and one million tips per year, and encouraging whistleblowers to come forward would assist the under-staffed agency with its enforcement efforts.
As these securities regulators move aggressively to improve the use of whistleblower tips and complaints, securities firms could well become subject to greater regulatory scrutiny and increased enforcement action.