SEC Logo

In a recent interview with The American Lawyer, Sean McKessey, Chief of the SEC’s Office of the Whistleblower since February 2011, cautioned employers about dissuading potential whistleblowers from complaining to the SEC.  Mr. McKessey made his remarks in the wake of the SEC’s recent Annual Report on the Dodd-Frank Whistleblower Program, which revealed that the SEC has received 3,001 tips during its 2012 fiscal year (the first year of this program), and it paid out its first award to a whistleblower in 2012.  We described the key portions of the SEC’s Annual Report in our previous post, available here.

Despite the issuance of only one award totaling under $50,000 during the first year of the Dodd-Frank Whistleblower Program, Mr. McKessey believes that the SEC’s whistleblower bounty program is off to a strong start and explained that applying for awards involves statutorily-imposed waiting periods that can cause delays in issuing awards.  Notwithstanding Mr. McKessey’s belief that the SEC’s Whistleblower Program has thus far been successful, according to The American Lawyer interview, he expressed concern that employers and their attorneys have attempted to prevent employees from making whistleblower tips to the SEC.  The stated basis for Mr. McKessey’s belief is that “corporate lawyers” too often ask him what kind of policies and/or agreements can be drafted to prohibit employees from reporting whistleblower claims to the SEC.  Mr. McKessey apparently takes exception to such questions and reportedly stated, “If you’re dissuading or prohibiting individuals from reporting to us, you’re violating the rules.”   

In the interview, Mr. McKessey also reportedly explained that the SEC’s Office of General Counsel has told him to find examples of lawyers violating these rules.  According to Mr. McKessey, “If [lawyers] are drafting very aggressive language to intimidate employees, we want to know about it.  The authors of that language might be held accountable.”

Of course, there is presumably a distinction between taking steps to prohibit employees from contacting or cooperating with the SEC, on one hand, versus, on the other, encouraging them to report their concerns internally.  We don’t believe that Mr. McKessey’s remarks were intended to suggest otherwise.  Employers (and their counsel acting in an advisory capacity) can and should encourage employees to report concerns internally.  That said, employers should, for example, refrain from including language in separation or settlement agreements that prevents current or former employees from reporting concerns to the SEC.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.

Photo of Rachel Fischer Rachel Fischer

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour…

Rachel S. Fischer is a senior counsel in the Labor & Employment Law Department.

Rachel represents employers in all types of employment-related disputes, including defending clients against claims of discrimination, harassment, retaliation, wrongful discharge, whistleblowing, breach of contract, and in wage and hour matters. She represents employers in federal and state courts, arbitration tribunals, and before administrative agencies, and has litigated both single plaintiff and class action lawsuits. As an experienced trial lawyer, Rachel has successfully litigated numerous cases from complaint through jury verdict or arbitral award.

Rachel represents employers across a wide variety of industries, including banking and finance, law firms, media and entertainment, sports, and higher education.

Rachel also counsels clients on a broad range of employment law matters, including investigations, employee terminations and discipline, and employment policies and procedures.