SEC Talks Whistleblowers and Interactive Disclosure with Boston NIRI
The annual visit of David Bergers, Director of the Boston Regional Office of the Securities and Exchange Commission (SEC) to the Boston NIRI chapter yesterday could not have been better timed. Bergers always updates the chapter members on any regulatory or other changes the SEC has made over the past year and the impact this may have on the public companies represented by the chapter members during the current reporting year.
A major theme of his talk was summarized up front when he said that despite the SEC's current budget constraints, the agency is doing a lot to "protect your money." Bergers referenced an op ed piece published in Tuesday's Wall Street Journal in which President Obama talked about the executive order that he is signing as part of an initiative to make sure that government regulations and agencies are striking the right balance between protecting the public and hampering business. Similar to Berger's message from the SEC, Obama's op ed describes his new executive order as follows:
This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.
Changes at the SEC
Bergers talked about the positive changes at the SEC over the past year, including the hiring of more experts from the industry -- again echoing the President's published views -- so it will have more knowledge and understanding of the companies and markets it is regulating, rather than be viewed as an agency of lawyers.
The biggest change over the past year that Bergers discussed was the Dodd-Frank bill and, in particular, the whistleblowers statute, which has two provisions.
The first one includes incentives that can award 10-20% of the recovered amount from the SEC investigation of a tip from a whistleblower directly to the whistleblower. The second provision is for retaliation fees to help whistleblowers who lose their jobs -- or voluntarily sever their employment contract -- after they provide a tip to the SEC. Based on concerns that the richness of the bounties might drive individuals to go directly to the SEC with tips, Bergers said the agency is currently in the process of revising how these rewards are applied to encourage individuals to follow their internal corporate governance processes before bringing their concerns directly to the agency.
Meanwhile, though, the awards paid out to whistleblowers have been substantial,which means the penalty money retrieved by the SEC is even more substantial, which gets back to Bergers' comments that the SEC is "protecting our money." He had several great examples of recent cases to describe how the whistleblower process is working. These examples also underscored for the assembled group of IR and communications professionals the importance of careful adherence to all corporate governance restrictions related to non-public material information about public companies.
Bergers' Boston-based colleague, David Blaszkowsky, Director of the SEC's Office of Interactive Disclosure, joined him briefly to update the NIRI attendees on the Interactive Data Program, which is now rolling out XBRL as the tagging standard for U.S. financial reporting. The program has been rolled out in a phased approach, he said, and 6,000-8,000 companies will be covered by the rules for interactive disclosure this year. His advice for companies who will need to comply with this new approach in 2011 is to get started now and to ask for help from the SEC, as needed.
It's always helpful to hear the SEC updates each year and it was encouraging to see how much this agency's direction and mission dovetails with the President's view on government regulations going forward.