New SEC Exam Initiative – Whistleblower Rule Compliance

The SEC issued a National Exam Program (NEP) Risk Alert on Monday, October 24th to put investment advisers and broker-dealer registrants on notice that OCIE examiners are looking into how firms comply with Rule 21F-17 of the Dodd-Frank Act, otherwise known as the the “Whistleblower Rule.”

Examination staff are concerned that registrants are limiting the rights of employees and/or former employees regarding their ability to “blow the whistle” on regulatory violations. Based upon the Risk Alert it appears that Rule 21F-17 compliance reviews will become a part of the routine examination of selected registrants for fiscal year 2017. The reviews will focus on key items such as:

  • Compliance Manuals for any written policies on Rule 21F-17
  • Code of Ethics for any employee guidelines, notice requirements, or policies
  • Employment Agreements’ use of restrictive language
  • Severance Agreements that limit communications with authorities

Registered investment advisers and broker-dealers that use Employment Agreements or Severance Agreements should review those contracts in light of this new Risk Alert, especially those that have not been examined by the SEC since 2010.

For more details view “Examining Whistleblower Rule Compliance,” October 24, 2016