A WHISTLEBLOWER STRATEGY FOR FINRA
BY PETER J.CHEPUCAVAGE AND TONY BROY
We agree generally with Bill Singer's concern over protecting whistleblowers (wb's) especially those working in the industry <http://www.brokeandbroker.com/index.php?a=blog&id=144>and offer the following suggestions for an effective program:
- Outsourcing the response function should be considered. Many wb's would prefer to report to a third party that cannot retaliate. Our private investigator colleagues at Corporate Resolutions Inc www.corporateresolutions.com have an ethics hotline that would work well especially for industry personnel.<http://www.cnbc.com/id/15840232?video=1040287708&play=1>
- FINRA needs to reassure the community that retaliation is not acceptable and should work with Singer on a policy for doing so. That policy at least needs to protect industry personnel from losing their jobs because they chose to do the right thing.
- Its not productive for FINRA and the SEC to establish separate wb programs.FINRA should assess complaints initially and refer serious ones to the SEC. A wb not satisfied can then go directly to the SEC.
- The press should play a major role in being open to wb's and encouraging them to come forward.
- New York and not Washington is where the wb function should be centered.
- The wb analysis and response should consider the following factors in prioritizing the complaints received:
1) multiple sources or
wb's regarding the same parties or issues;
2) the detail of the information provided;
3) whether the wb wishes to remain anonymous even if he is directed to a 3rd party as suggested above;
4) size of the alleged problem
The wb issue has a long history going back to the Salomon Brothers case where the Commission suggested that there may be a need to go to the board of directors when management will not respond to warnings. Most recently the Commission adopted a rule regarding noisy withdrawals for counsel representing issuers who become aware of wrongdoing. Final Rule: Implementation of Standards of Professional Conduct for Attorneys; Release Nos. 33-8185; 34-47276; IC-25929; File No. S7-45-02 . However broker dealer personnel are still subject to intimidation including loss of employment for wb activty.FINRA and the SEC need to put some solid protection in place if they expect wb's to risk their careers or safety.