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In recent enforcement actions by the SEC, seven public companies were charged with violating whistleblower protection rule and were required to pay civil penalties as a result. The fines imposed on these companies serve as a stark reminder of the potential pitfalls of failing to adequately protect whistleblowers within organizations.
Acadia Healthcare Company, Inc. agreed to pay a substantial civil penalty of $1,386,000, while a.k.a. Brands Holding Corp. agreed to pay $399,750. AppFolio, Inc. faced a civil penalty of $692,250, and IDEX Corporation was fined $75,000. LSB Industries agreed to pay a civil penalty of $156,000, Smart for Life, Inc. faced a fine of $19,500, and TransUnion was fined $312,000.
These significant penalties for violating Rule 21F-17(a) underscore the importance of having robust whistleblower protection policies in place to prevent violations. The SEC aim to use these enforcement actions to protect employees who come forward with information about potential securities law violations. It’s therefore vital to have and maintain the correct framework for a whistleblower policy to avoid facing similar fines and penalties in the future. This means regularly conducting comprehensive audits, keeping on top of your documentation, and training your staff accordingly.
Understanding the potential financial implications of failing to comply with whistleblower protection rules can help you take proactive steps to strengthen your whistleblower policies and procedures. This means regular reviews / testing of the whistleblower policy and consistently training your employees to ensure they understand what’s required. Working with a third-party with expertise in this area can help ensure that you have the necessary safeguards in place to prevent violations and protect whistleblowers within your organizations.
How can Bovill Newgate help you ensure your whistleblower policy is robust?
Our team can advise you on creating comprehensive compliance assessments and plans, capturing both customer and organisational requirements. We help demonstrate to the regulators that you understand and actively manage your internal compliance program.
Our support includes providing:
- health checks and internal audits, reviewing policies, procedures and controls including the development of your business-wide documentation
- tailored mock exams to help identify your compliance pain points and strengthen your policies and procedures, including training staff and the wider business
- preparing detailed reports and summaries to address any deficiencies or summarize staff interviews.
Get in touch if you’d like to find out whether your firm is in scope for an examination or want to discuss other solutions to strengthen your compliance culture and processes.
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