For would-be whistleblowers, one of the biggest questions is if they should make an internal report rather than go to the SEC. In fact, 83% of the SEC whistleblowers did raise the subject of their concerns internally, before they went to the SEC. So how do you decide? While there are a lot of factors that will go into your decision, two of the considerations you should address are your goal in making the report and your timing: Is your goal more about punishing the wrongdoers for something that’s already happened, or is it more about preventing the company from committing a violation? And when is an internal or external report the better choice?
While there is evidence that sanctioned companies often clean up their act going forward, a report to the SEC is obviously going to be focused on sanctioning the company for wrongdoing they’ve already perpetrated.
If you’re making an internal report, you’re giving the company a chance to fix the issue independently.
That’s why the SEC has said that if you make an internal report, and then also report the issue to the SEC within 120 days of your internal complaint, then the SEC will say that the date of your internal complaint is the effective date for your SEC complaint. Further, if the company makes an internal investigation and reports its findings to the SEC, then you’ll get credit for the company’s findings. Because, whether done by the SEC or the company itself, you still catalyzed an investigation into wrongdoing that resulted in the company’s corrective action. And you still deserve to be rewarded for that.
By contrast, if you are an accountant, attorney, director, or another employee who works on compliance-related issues, the 120-day window is reversed. In that situation, your job is to monitor the company and notify responsible authorities of areas for concern. Therefore, in those positions, if you’ve notified the audit committee or other relevant parties of an issue, then the company has 120 days to act. If they have not done so within that time, then you can become an eligible whistleblower reporting about the company’s malfeasance.
Whether you are going to file an internal report or call law enforcement, given the complexities of all the issues, before you do anything, consider hiring legal counsel to advise you.
The securities attorneys at the Silver Law Group and the Law Firm of David R. Chase are adept at handling whistleblowing cases with many years of experience, and we are here to help. For a free, confidential consultation, contact us through our website or call today at (800)975-4345.