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Sarbanes-Oxley versus Frank-Dodd

Sarbanes-Oxley versus Frank-Dodd

 

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When it comes to Sarbanes/Oxley (2002) being gored amid Dodd-Frank financial reform, while simultaneously encouraging whistle blowers, count Allstate Insurance…undecided. Richard Crist is an industry expert on whistle blowing, and also works as the chief ethics officer at Allstate. But Crist’s take on Sarbanes-Oxley is temperate, at best.

Crist worries:

“It undermines a lot of work that a lot of us have done.”

The ‘it’ of concern to Crist is the bounty provision in the financial reform package known as Dodd-Frank, whereby a raft of new Whistleblower claims will be allowed. Where Sarbanes-Oxley allowed claims under the rubric of the False Claims Act, Dodd-Frank adds securities or accounting fraud and even bribery cases…activities never directly covered by the 2002 Act. Crist believes internal auditing will be dealt a blow by Dodd-Frank.

Regardless, whistle blower rules are not yet close to being ‘set in stone’ by Dodd-Frank. The Securities and Exchange Commission (SEC) is presently facing enormous political and administrative pressures as to the specifics in how the new whistle blowing rules will be developed and implemented. Time is seen as essential in whistleblower reform, by all sides. Unfortunately, delay is seen as desirable by many.

Even as the debate heats up, the SEC has stated it has received “hundreds” of new tips in 2010, all potentially eligible for immediate “spot” rewards under the new law. In addition to the SEC, the Dodd-Frank act allows complaints to be brought directly to the Commodity Futures Trading Commission. If Allstate’s Crist was worried about the whistle blower system seizing up, there is little evidence of it so far. Instead, the enormous ($750 million) settlement with GlaxoSmithKline in October, 2010, suggests the opposite…whistle blowers may be gearing up for a veritable explosion in outing their employers.

One expert, Michael Brozzetti of Boundless LLC—a prominent Philadelphia internal audit agency—warns that whistleblower rewards need to be more “timely.”[2]The results of the conflicts of law between Sarbanes and Frank may yield the worst of inertia: increased claims, and delayed investigations.

 


[1] The Wall Street Journal, November 1, 2010.

[2] Characterized the new laws as part of a “new era” in the American economic system; Boundless Press Release, September (2009).

 
 
 

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