Securities Law Section



Message from the Chair

Section Chair: 


 
Charles Niemeier
Williams & Connolly LLP
Washington, D.C.

Join the Section

The Federal Barr Association - Securities Law Section is a proud sponsor of the virtual museum and archive of the history of financial regulation at www.sechistorical.org. While the museum is free and accessible to everyone at all times, the Section will highlight specific material and information within the museum on securities law issues in the coming months, providing current and prospective Section members with unique insight and context.

In December 2008, the Department of Justice and the SEC charged Bernard Madoff with securities fraud for running the largest Ponzi scheme in American history.  A few days later, the SEC Commissioners learn that allegations regarding Madoff’s illegal activity had been brought to the staff’s attention since at least 1992, yet were not fully investigated.   

SEC Chairman Christopher Cox asked the Office of the Inspector General to investigate the SEC’s internal policies relating to allegations of fraudulent activity received from members of the public.  The OIG concluded that the numerous complaints against Madoff raised red flags and should have led to a more thorough investigation of Madoff’s activities.  Had SEC staff followed through, the OIG said, Madoff’s Ponzi scheme would have been uncovered long before his shocking public downfall in 2008.

The SEC already had a system in place for whistleblowers to report potential securities law violations, but the SEC wasn't receiving many tips because the process was too cumbersome.  In 2010, when Congress passed the Dodd-Frank Act, whistleblower language was included to allow persons who had provided the Commission with original information leading to an enforcement action to receive 10 to 30 percent of the monetary sanctions collected from the violator.  In setting up the new program, however, the SEC had to resolve an important question -- would an internal whistleblower have to notify his or her own company of potential wrongdoing and face possible retaliation or could he or she report directly to the SEC?  

David Bergers, the former head of the SEC’s Boston regional office, who worked with members of the General Counsel’s Office in drafting the implementing regulations for the Dodd-Frank whistleblower provisions, remembered, “There might be a program where the whistleblower wants to report on the very people running that program or the very people that would hear about that and put themselves in danger of either losing their job or other things that could come of that.”  SEC Chairman Mary Schapiro described the compromise in her remarks on the whistleblower program rules, “…the final recommendation strikes the correct balance – a balance between encouraging whistleblowers to pursue the route of internal compliance when appropriate – while providing them the option of heading directly to the SEC. This makes sense as well because it is the whistleblower who is in the best position to know which route is best to pursue.”

In the six years since the SEC’s new whistleblower program was implemented, it has awarded approximately $156 million dollars to 45 whistleblowers.  With a robust and streamlined program, hopefully schemes like Madoff’s will remain a rarity.

 

Resources

The Source: June 2017


The Source: March 2017


The Source: December 2016


The Source: September 2016


The Source: June 2016


The Source: March 2016


Section ByLaws


Join the Section


select
select
select
select

Connect With Us...