Securities Law

WaPo: SEC Ignores Whistle-blowers, Lacks--and Violates--Tip Procedures


Even though the Securities and Exchange Commission often can’t offer a reward, whistle-blowers still come to the agency with tips about claimed wrongdoing.

The problem is, the SEC may not follow up on them, reports the Washington Post.

Lacking a uniform system for addressing tips, the agency apparently all-too-frequently lets them fall between the cracks of its reporting floor, according to the newspaper. In 2004, for instance, Leyla Wydler, a former vice president of R. Allen Stanford’s Houston-based company, contacted the SEC’s Fort Worth office with questions about how it was investing client money. The agency responded in early 2009. Stanford is now jailed and accused of running a large Ponzi scheme, as detailed in other ABAJournal.com posts.

The SEC has also violated its own procedures, promising confidentiality to former JPMorgan Chase compliance department employee Peter Sivere and then disclosing information about his whistle-blower conversations to bank lawyers, the Post recounts.

The SEC is now overhauling its procedures, working on a centralized system for handling the thousands of tips it receives and seeking authorization from Congress to offer more rewards.

“There was no uniformity to it. Every division and office had its own system of recording, tracking or handling tips and complaints,” says Steve Cohen. He is the official assigned by SEC Chair Mary Schapiro to overhaul its system of dealing with whistle-blowers. “We’re already working to acquire and deploy technology that centralizes all of the agency’s tips and complaints so they can be sorted, reviewed, analyzed and tracked.”

Hat tip: Blog of Legal Times.

Related earlier coverage:

ABAJournal.com: “Madoff Whistle-blower to Blast SEC in Congressional Testimony Tomorrow”

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