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  • Writer's pictureRita Rhodes

Whistleblowing Policies

Updated: Dec 31, 2023


Basketball coach blowing whistle

In April, Washington became the fifth state (following Indiana, Montana, Utah, and Vermont) to enact a whistleblower policy, based on the NASAA model act. The policy becomes effective July 23 of this year, and outlines the terms under which awards and protections will be provided to someone who reports violations of any federal or state securities laws. The policy also prohibits the whistleblower's employer from any retaliatory actions against the whistleblower.

 

Whistleblower policies aren't new; in 2011, the Dodd-Frank Act enacted "Whistleblower Incentives and Protection." You've undoubtedly heard news stories about whistleblowers receiving sizable awards. The NASAA model act establishes a state-level program with provisions similar to Dodd-Frank's provisions.

 

If you are a solo-practitioner, a whistleblower policy probably isn't necessary; you're not likely to blow the whistle on yourself. However, if you have employees, you may wish to consider stating in your compliance manual that employees may report violations to you as CCO, or directly to regulators, and affirmatively state that it is the firm's policy not to retaliate against any employee for reporting a violation. As an example of what not to do, see this 2021 administrative proceeding against Guggenheim Securities. The SEC slapped the firm with a penalty in excess of $200,000 because its policies strictly prohibited employees from speaking with regulators.

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