An associate director in the SEC’s Division of Enforcement warns compliance officers that the agency is levying heavier penalties for unethical conduct.
Addressing members on Monday at the Society of Corporate Compliance and Ethics (SCCE) annual conference in Las Vegas, Stephen Cohen, an associate director in the SEC’s Division of Enforcement, reminded compliance officers of their role as trusted advisers and not ‘hallway monitors’.
‘Compliance officers should have a seat of power… [with] the necessary authority and independence to help lead your organization,’ said Cohen to a room filled with over 500 governance, risk and compliance professionals.
But building a strong compliance structure is not easy. Simultaneously, the SEC is zeroing in on companies that have loopholes in their programs and are imposing greater fines on firms that are not in compliance with regulations.
In 2010, the SEC slapped Goldman Sachs a $550 million penalty for selling mortgage securities it knew would fail. The watchdog’s lawsuit called into question Goldman’s business ethics and the end result was the largest penalty ever paid by a major Wall Street firm in an SEC action.
‘Good ethics spells good business,’ Cohen continued. ‘Consider the damage to Goldman’s reputation. I wonder if things might have been different had the company reviewed its business ethics before our lawsuit rather than in the aftermath’.
Whistleblowing is another important and controversial topic for compliance officers. Now that whistleblowers can file a claim online, the SEC has seen an increase in the amount of tips from employees who are aware of corporate wrongdoing. In August, the federal watchdog announced a $50,000 payout to a whistleblower who helped track down a multi-million dollar fraud scheme.
This cash incentive marked the first payout from the SEC’s year-old whistleblower program which the regulator adopted to encourage employees to come forward with knowledge of corporate misconduct. And the reward? The SEC will pay up to 30 percent of any recovery or monetary sanctions of over $1 million to those who provide tips leading to successful enforcement.
‘Whistleblowers can complement any compliance and ethics program because they provide a company with the right opportunity to continue to do the right thing,’ Cohen says.
