Bank of America Whistleblower Judgment Highlights the Need for Investment Advisers to Have Whistleblower Policies and Procedures in Place

September 22, 2011

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The Department of Labor recently required Bank of America to rehire and pay $930,000 to an employee who was fired for whistleblowing.  The employee had been leading an internal investigation looking into wire, mail and bank fraud at Countrywide Financial, which merged with Bank of America in 2008.  Shortly after the two companies merged, the employee was fired.  The employee then filed a Sarbanes-Oxley claim alleging she was fired due to the internal investigation.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (“SEC”) has created a whistleblower program that allows the SEC to reward whistleblowers by giving them up to 30% of any recovery above $1 million.  The program also prohibits employers from retaliating against any employees who become whistleblowers.  As seen in the Bank of America case, if retaliation does occur, the employer may be required to rehire the employee and to provide damages in the amount of double back pay.

The SEC program is also structured so that whistleblowers would be incentivized to report complaints to internal compliance programs.  So, all investment advisers need to update their existing policies and procedures to address the handling of whistleblower complaints.

RIA Compliance Consultants is currently offering an update to our Written Supervisory Procedures.  We have created or updated 21 different sections for the Code of Ethics and Written Supervisory Procedures to reflect recent changes to the securities laws and regulations.  Along with handling whistleblower complaints, these updated policies and procedures address topics such as social media use, information security, and client documents and disclosures.   Included with these updates is a package of Sample Forms that every investment adviser should be using to meet the books and records requirements.  Contact one of our compliance consultants today to order your copy of our whistleblower policy along with the rest of our updated policies and procedures.

Posted by Bryan Hill
Labels: SEC, Whistleblower