SEC to revamp whistle-blower process

Following a series of failures to spot large-scale fraud, the SEC is moving to improve handling of whistle-blowing and enforcement tips

WASHINGTON, DC - The US Securities and Exchange Commission (SEC) is moving to improve the handling of whistle-blower complaints and enforcement tips in order to better protect investors. The news was announced by chairman Mary Schapiro on March 5, and forms part of a series of improvement she has initiated since taking over at the beginning of the year.

In its bid to improve the enforcement process, the SEC has enlisted the services of the Center for Enterprise Modernization, a federally funded research and development centre, to begin immediately working with the SEC to conduct a comprehensive review of internal procedures used to evaluate tips, complaints and referrals. The agency is seeking to establish a more centralised process that will more effectively identify valuable leads for potential enforcement action as well as areas of high risk for compliance examinations.

"As we continue to reinvigorate our enforcement efforts as an agency, it's vitally important that we move very aggressively to improve staff's use of tips and complaints from investors and whistle-blowers," said Schapiro. "This comprehensive review will help us identify and improve areas within the agency where gaps or lack of communication may cause breakdowns that prevent us from ensuring swift and vigorous enforcement."

The SEC typically receives hundreds of thousands of tips and complaints per year from investors and the general public as well as from those the SEC regulates, including broker-dealers, investment advisers and public companies. These communications come through a variety of means, including web forms, email, phone calls, mail, messengers and faxes. Tips and complaints can come into several different divisions and offices within the SEC's Washington, DC, headquarters, and each of the SEC's 11 regional offices around the country. The SEC also receives referrals from self-regulatory organisations (SROs), other government agencies, and foreign regulators.

The SEC's review will scrutinise the agency's processes for receiving, tracking, analysing and acting upon the tips, complaints and referrals from these outside sources. The goal of the review is to improve the efficiency, effectiveness and overall management of how the agency addresses tips, complaints and referrals, and how SEC staff utilise the information received to protect investors.