Whistleblowers' 'Advocate'

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1 1/4 READ Cox BusinessVoice: 9 Critical Functions Of Your Busi... By Murray Goldstein When business owners think about continuity planning, many tend to limit the scope of their plans to simple IT The Insider ( We cover white collar defense and securities enforcement. Opinions expressed by Forbes Contributors are their own. LAW & REGULATION (/LAW-REGULATION) 10:14AM 44 views SEC, The Whistleblowers' 'Advocate' Catherine Foti ( Contributor 1 of 13 6/18/15 11:58 AM

2 SEC, The Whistleblowers' 'Advocate' Comment Now Follow Comments After the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010, speculation abounded as to whether the ambitious whistleblower bounty program would succeed and about how the Securities and Exchange Commission would support the program. But, in the four years since the bounty program became effective, the SEC has proved that it will do what it takes to make the program successful, including awarding payments totaling over $50 million to whistleblowers; appearing as amicus curiae in support of whistleblowers seeking protection under Dodd Frank s anti-retaliation provisions; and pursuing companies that retaliate against whistleblowers or attempt to prevent whistleblowers from bringing tips to the SEC. In fact in a recent speech ( SEC Chair Mary Jo White ( /mary-jo-white/) dubbed the SEC the whistleblower s advocate. 2 of 13 6/18/15 11:58 AM

3 Chair of the Securities and Exchange Commission Mary Jo White testifies before Senate Banking, Housing and Urban Affairs Committee in September. The committee held a hearing on Wall Street Reform: Assessing and Enhancing the Financial Regulatory System. (Photo by Alex Wong/Getty Images) Since its inception in 2011, the SEC s Office of the Whistleblower has received thousands of tips from whistleblowers from across the United States and sixty foreign countries and has paid awards totaling more than $50 million to seventeen whistleblowers. SEC Chair White recently praised the quality of the tips, explaining that they are of tremendous help to the [SEC] in stopping ongoing and imminent fraud, and lead to significant enforcement actions on a much faster timetable than we would be able to achieve without the information and assistance from the whistleblower. She also commented that the program has created a powerful incentive for companies to self-report wrongdoing to the SEC companies now know that if they do not, we may hear about the conduct from someone else. The fact that only seventeen 3 of 13 6/18/15 11:58 AM

4 whistleblowers have received bounty awards reveals that for most whistleblowers the possibility of a rich reward is remote, however, the SEC is encouraging whistleblowers to continue to provide information and through its actions and the statements of its officials is making clear that it will do its utmost to protect them. The SEC s first retaliation case, In the Matter of Paradigm Capital Management, Inc. and Candace King Weir ( /News/PressRelease/Detail/PressRelease/ ), is an example of the extent of the SEC s efforts on behalf of whistleblowers. The $600,000 award to the whistleblower in Paradigm constituted thirty percent of the amount collected from the Paradigm and its principal the maximum award payable under the Dodd-Frank Act. The whistleblower, who was the fund s head trader, reported to the SEC trading activity revealing improper principal transactions and immediately was demoted and had his job function changed from head trader to compliance associate. An April 28 SEC Release ( noted [t]he whistleblower in this matter suffered unique hardships, including retaliation, as a result of reporting to the Commission. In remarking on Paradigm during her April speech, White made clear that the SEC take[s] these whistleblower protections very seriously and companies should too. White further noted that it is past time to stop wringing our hands about whistleblowers and described the SEC not just as a government representative, but as an advocate for whistleblowers. White also warned that the SEC s Enforcement Division has been focused on companies that use agreements or other mechanisms to improperly stifle whistleblowers from coming forward. White referenced the SEC s first 4 of 13 6/18/15 11:58 AM

5 enforcement action announced on April 1 ( / html) against a company that required internal investigation witnesses to sign confidentiality statements that included language warning that employees who discussed the subject matter of the interviews with outside parties without prior permission could face discipline and suggested that companies ensure that their employees understand that it is always permissible to report possible securities law violations to the Commission. The case was even more significant given that the agreements the SEC found problematic reportedly ( /sec-finds-that-kbr-confidentiality-agreements-stifled-whistleblowers /2015/04/01/c78f6708-d884-11e fa84725dbf9d_story.html) had been in existence for years before the advent of the SEC s whistleblower program. Finally, White referred to the SEC s advocacy on behalf of whistleblowers in the form of amicus briefs that it has filed in cases pending before the Second and Third Circuit Courts of Appeals. Those cases, both of which were argued this month, involve whistleblowers terminated as a result of internally reporting suspected misconduct. In Berman v. Neo@Ogilvy LLC ( the company s Finance Director was terminated after internally reporting accounting irregularities. After his termination, the whistleblower reported the suspect conduct to the SEC. In Safarian v. American DG Energy Inc. 5 of 13 6/18/15 11:58 AM

6 ( the whistleblower also reported suspected misconduct internally but not to the SEC. In both these cases, the SEC advocates that a whistleblower who reports suspected misconduct only to his employer but not to the SEC is a whistleblower entitled to the protection of the Dodd-Frank Anti-Retaliation provision. The Safarian case raises multiple issues and Third Circuit may not reach the Dodd-Frank issue. The Berman case, however, is likely to elicit much-needed guidance from the Second Circuit on the issue of the reach of Dodd-Frank s anti-retaliation provisions. Given the SEC s focus on protecting whistleblowers, employers should proceed with caution and heed SEC Chair White s warning that the SEC is working hard to foster a safe environment for whistleblowers by investigating and charging those who retaliate as well as those who, whether inadvertently or not, take actions or use agreements that could chill the willingness of employees to report violations of law to the SEC. To read more from Catherine Foti ( /catherine-foti), please visit ( Comment Now Follow Comments 6 of 13 6/18/15 11:58 AM

7 SEC, The Whistleblowers' 'Advocate' Promoted Stories 1. How To Lift Sagging Skin [DO THIS DAILY] a week ago beverlyhillsmd.com Beverly Hills MD (sponsored) 2. The Insider ( We cover white collar defense and securities enforcement. Opinions expressed by Forbes Contributors are their own. LAW & REGULATION (/LAW-REGULATION) 7 of 13 1:27PM 1,243 views 6/18/15 11:58 AM

8 Ethical Rules For Social Media Gain Clarity Catherine Foti ( Contributor Comment Now On March 10, 2015, the New York County Lawyers Association ( ( NYCLA ) weighed in on the ethical implications for lawyers who use social media websites for professional self-promotion. In Formal Opinion 748 ( /Publications1748_0.pdf), NYCLA addressed the widespread use of LinkedIn and specifically examined (1) whether a LinkedIn profile is considered Attorney Advertising; (2) when it is appropriate for attorneys to accept endorsements and recommendations; and (3) what information attorneys should include and exclude from social media profiles. Although the NYCLA opinion does not resolve all open questions about the nature and extent of the information attorneys can post on LinkedIn without running afoul of the New York Rules of Professional Conduct ( /jointappellate/ny-rules-prof-conduct-1200.pdf), it answers significant questions left open by two Committees of the New York State Bar Association (NYSBA). New York Attorneys May Ethically List Practice Areas Under LinkedIn Headings Products and Services or Skills and Expertise 8 of 13 6/18/15 11:58 AM

9 The NYSBA Committee on Professional Ethics in Formal Opinion 972 ( and the NYSBA Commercial and Federal Litigation Section in the Social Media Ethics Guidelines ( /Com_Fed_PDFs/Social_Media_Ethics_Guidelines.html) (the Social Media Guidelines ) counseled that lawyers are ethically prohibited from identifying themselves under pre-defined headings as specialist unless appropriately certified. (See my previous blog post Social Media for Attorneys: Good Business or Ethical Minefield? ( for a discussion of the Social Media Ethics Guidelines.) Neither committee, however, addressed whether a lawyer or law firm may list practice areas under other headings such as Products and Services or Skills and Expertise. Formal Opinion 748 addresses this gap in the guidance and concludes that, provided that the word specialist is not used, lawyers may list skills or practice areas under LinkedIn s predefined headings Experience or Skills without violating New York Rule of Professional Conduct 7.4, which prohibits an attorney from calling herself a specialist or representing that she specializes in a particular field of law unless the attorney has the appropriate certification. But, Formal Opinion 748 warns that attorneys should monitor their LinkedIn pages at reasonable intervals to ensure that other are not endorsing them as specialist. The Opinion notably does not define what constitutes a reasonable interval. Attorneys Are Responsible For Periodically Monitoring Their LinkedIn Profiles Formal Opinion 748 also addresses the ethical considerations relating to 9 of 13 6/18/15 11:58 AM

10 endorsements or recommendations that originate from other users but appear on an attorney s LinkedIn profile, and concludes that because a user has control over the content of her profile, she is responsible for monitoring its content for truthfulness. While we do not believe that attorneys are ethically obligated to review, monitor and revise their LinkedIn sites on a daily or even a weekly basis, there is a duty to review social networking sites and confirm their accuracy periodically, at reasonable intervals. Here too, it remains unclear what constitutes a reasonable interval except that neither daily nor weekly monitoring seems to be required. Many Attorneys LinkedIn Profiles Will Be Treated As Attorney Advertising Formal Opinion 748 advises that a New York attorney s LinkedIn profile that includes information other than his or her educational and employment history such as a detailed description of practice areas and work done in prior employment should include the words Attorney Advertising. A LinkedIn profile also should have the disclaimer, [p]rior results do not guarantee a similar outcome, if it includes: (1) statements that are reasonably likely to create an expectation about results the lawyer can achieve; (2) statements that compare the lawyer s services with the services of other lawyers; (3) testimonials or endorsements of clients; or (4) statements describing or characterizing the quality of the lawyer s or law firm s services. This expands upon the guidance set forth in the NYSBA s Social Media Guidelines, which state that social media used primarily for business purposes is subject to the attorney advertising and solicitation rules. Formal Opinion 748 does not suggest how attorneys should navigate the pre-defined 10 of 13 6/18/15 11:58 AM

11 fields on LinkedIn and other social media websites to include the required information. The format and content of social media websites constantly is in flux and attorneys and bar associations are struggling to keep pace. Attorneys who use these websites must stay abreast of the ethics guidance to ensure that they are complying with the Rules of Professional Conduct. But, in this ever-developing area where issues of professional ethics intersect with the Internet, even the most diligent attorneys should proceed with caution. To read more from Catherine Foti ( /catherine-foti), please visit ( Comment Now 11 of 13 6/18/15 11:58 AM

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