SEC Whistleblower Compensation Rule

Proposed SEC Whistleblower Compensation Rule The Commission proposes the new rules and forms contained in this document under the authority set forth in Sections 3(b), 21F and 23(a) of the Exchange Act. List of Subjects 17 CFR Part§ 240 and 249 Securities TEXT OF THE PROPOSED RULES In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows. Part 240 – General Rules and Regulations, Securities Exchange Act of 1934 1. The authority citation for part 240 is amended by adding the following citation in numerical order to read as follows: Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78-i, 78j, 78j,-1, 78k, 78k-1, 78 /, 78m, 78n, 78 o, 78 o-4, 78p, 78q, 78s, 78u-5, 78w, 78x, 78 ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and 12 U.S.C. 5221(e)(3), unless otherwise noted. ***** Section 240.21F is also issued under Pub. L. No. 111-203, s922(a), 124 Stat. 1841 (2010). ***** 2. By adding § 240.21F-1 through § 240.21F-16 to read as follows: § 240.21F-1 General. Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) (15 U.S.C. 78u-6), entitled “Securities Whistleblower Incentives and Protection,” requires the Securities and Exchange Commission (“Commission”) to pay awards, subject to certain limitations and conditions, to whistleblowers who provide the Commission with original information about violations of the federal securities laws. These rules describe the whistleblower program that the Commission has established to implement the provisions of Section 21F, and explain...

“Boeing ex-employees lose whistle-blower case” – San Francisco Chronicle

Boeing ex-employees lose whistle-blower case *protected email* San Francisco Chronicle October 31, 2011 02:56 PM Copyright San Francisco Chronicle. All rights reserved. (10-31) 14:56 PDT — The U.S. Supreme Court rejected an appeal today by two fired Boeing Co. employees who claimed federal law protected them from retaliation for going to the news media with their complaints of alleged company wrongdoing. The justices, without comment, denied review of a ruling by the federal appeals court in San Francisco that said a law designed to crack down on corporate fraud doesn’t protect whistle-blowers who talk to the press. The 2002 Sarbanes-Oxley Act prohibits publicly traded companies from punishing employees who reveal suspected fraud to a workplace supervisor, a federal agency or a member of Congress – but not to the media, the Ninth U.S. Circuit Court of Appeals said in a ruling May 3. The employees, Matthew Neumann of Seattle and Nicholas Tides of St. Louis, were auditors assigned in January 2007 to a Boeing unit that conducted annual audits for compliance with Sarbanes-Oxley. The law tightened regulation of publicly held corporations and required increased internal controls. Both men said Boeing’s audit software was vulnerable to tampering, that private contractors had too much authority and that managers had pressured them to give the system high ratings. They said supervisors paid no attention to their repeated complaints, so they talked to a reporter with the Seattle Post-Intelligencer, which published the story in July 2007. Boeing fired Neumann and Tides several months later (The Post-Intelligencer is owned by Hearst Corp., which also owns The Chronicle.). Their lawsuit against the company argued that...

“High Court Won’t Hear Boeing Workers’ Media Leak Case” – Law360

High Court Won’t Hear Boeing Workers’ Media Leak Case SOX Doesn’t Cover Employees’ Media Leaks: 9th Circ. Boeing SOX Plaintiffs Seek Supreme Court Review 9th Circ. SOX Ruling May Curb More Than Media Leaks SOX Doesn’t Protect Boeing Auditors’ Media Leak: Judge Another Ousted Boeing Auditor Sues Over Retaliation By Django Gold Law360, New York (October 31, 2011, 2:29 PM ET) — The U.S. Supreme Court on Monday refused to consider the Ninth Circuit’s ruling in a case brought by Boeing Co. workers that the whistleblower protections of the Sarbanes-Oxley Act do not apply to employees who leak information to the news media. The high court’s refusal to grant certiorari marks the end of the appeals process for two former Boeing employees who sued the company after being fired for leaking complaints about Boeing’s auditing procedures to the press. “Obviously, I’m disappointed, but I’m not surprised,” plaintiffs’ attorney John Jacob Tollefsen told Law360 on Monday. “Nobody likes whistleblowers.” Tollefsen said the Ninth Circuit’s ruling would stand unless another appeals court made an opposing ruling, at which point the Supreme Court would intervene. “I don’t know if anyone’s going to have the courage to be a whistleblower, but if someone has the patience and the courage to pursue it through another circuit, we might see something,” Tollefsen said. “Meanwhile, you better not go to the press.” In May, the Ninth Circuit ruled that though the Sarbanes-Oxley Act of 2002 grants retaliation protection to employees who disclose evidence of employer fraud to federal and law enforcement agencies, Congress, or the employees’ supervisors, it does not protect those employees who go to...

“Sacked for telling tales”- The Economist

Sacked for telling tales Jul 7th 2011, 16:32 by Bhuma Shrivastava  | NEW YORK SNITCHING on your bosses’ dodgy doings has never been more rewarding. In May America’s Securities and Exchange Commission (SEC) announced a programme to make payments to whistleblowers whose tip-offs lead to their employers being fined $1m or more. The SEC was given the powers to set up the scheme under the Dodd-Frank financial-reform law, passed in the wake of the credit crunch. An earlier post-crisis law, Sarbanes-Oxley, passed in 2002 after accounting scandals at Enron and other big companies, included legal protections for individuals who speak out about corporate wrongdoing. But a recent court appeal raises doubts about how much protection whistleblowers can count on. Nicholas Tides and Matthew Neumann, both internal auditors at Boeing, were sacked for talking to a reporter from the Seattle Post-Intelligencer about their concerns over the planemaker’s internal controls. The two men said they had gone to the newspaper after they had raised their worries with their bosses 27 times but had been ignored. They sued their former employer, claiming protection under Sarbanes-Oxley, but the district court and, in May, a federal appeals court ruled that Boeing did have the right to fire them. Lawyers for the two auditors had argued that disclosures made “through” the news media were a means to “cause information to be provided” to federal regulators, law-enforcers or Congress. Boeing’s lawyers argued that the sacked men had made a disclosure “to” the press, whereas Sarbanes-Oxley only protects people who report their suspicions directly to the relevant authorities. The judges found Boeing’s arguments the more convincing. The...

“Whistleblowers And Sarbanes-Oxley Fallout” – Public Radio, KUOW News

Whistleblowers And Sarbanes-Oxley Fallout Patricia Murphy   05/17/2011 In 2007, two auditors for The Boeing Company came forward to complain about security weaknesses in the way the company handled its financial data. They never expected they would be putting their jobs at risk. But that is exactly what happened. That same year, Nicholas Tides and Matthew Neumann were fired; not for complaining, but for eventually going to the media with their complaints. Both men claimed they should be protected under whistleblower laws. They sued and lost. Now, a ninth circuit appeals court ruling has upheld the firing. The high court’s decision calls into question the rights of whistleblowers under the investor–protection law, Sarbanes–Oxley. KUOW’s Patricia Murphy reports. TRANSCRIPT Both Nicholas Tides and Matthew Neumann say that Boeing ignored their complaints and then pressured them to say there were no weaknesses. Andrea James is a former Seattle Post–Intelligencer reporter. She’s now a research analyst. Back in 2007, she was investigating potential auditing problems at Boeing. James tried to contact Tides and Neumann for the story, but was unsuccessful. Eventually the two men say they grew so frustrated with Boeing they talked with her. James: “You never want a story to put somebody’s livelihood at stake and I do believe that people don’t go to the press until they feel like they’ve exhausted all of their other options.” Later, her story was published in the P–I. It focused on computer security risks at Boeing and didn’t mention Tides or Neumann by name. But afterwards the airplane maker investigated and fired the men because they weren’t authorized to talk to the media. As...

“Boeing Ruling on Whistleblower Firing May Discourage Leaks to News Media” – Bloomberg

Boeing Ruling on Whistleblower Firing May Discourage Leaks to News Media By Ann Woolner and Karen Gullo – May 11, 2011 9:19 AM PT Two Boeing Co. (BA) auditors in 2007 thought they found weaknesses in the security of the firm’s financial reporting data. They complained, setting off a chain of events that may chill whistleblower leaks to news outlets. Nicholas Tides and Matthew Neumann say they told Boeing it might be violating the Sarbanes-Oxley investor-protection law by urging them to say data controls were in place that weren’t. Ignored and then pressured to look the other way, they said, the two spoke with a Seattle Post-Intelligencer reporter who had left messages asking about auditing problems. “Computer security faults put Boeing at risk,” a subsequent headline said. The airplane maker, already suspecting leaks, investigated and fired the men for unauthorized talking to the news media. They sued, citing Sarbanes-Oxley’s whistleblower protection, and lost. An appeals court said last week that the law doesn’t protect tipping off journalists. The ruling is now the law in nine western states. It will make hiding company wrongdoing easier, according to Ken Paulson, a former editor of USA Today who is president of the First Amendment Center, which follows free-speech issues. “Fewer whistleblowers will share information with the news media,” Paulson said. “There is no faster path to reform or to disclosure of corporate misdeeds than putting that information on the front page of a newspaper.” The Seattle paper covers Chicago-based Boeing, the world’s largest aerospace company, because its headquarters used to be in Seattle and it has aircraft factories in the area. Bill...