There was plenty of debate when the SEC adopted its new whistle blower bounty program.  Many commentators thought that the program would result in an onslaught of whistle blowers directly reporting to the SEC instead of first contacting the subject corporation.  The Quarterly Fraud Index reported, however, that the opposite may actually be taking place.  The new program appears to have caused many corporations to improve their internal reporting mechanisms.  If this effort continues, the fear of a mad rush to the SEC may have been irrational.

Among other things, the study found that the concern over the implementation of the program caused many companies to revamp their internal reporting policies and procedures.  By re-focusing on these internal reporting programs, the corporate world has also seen an increase of internal fraud reporting, as opposed to an influx of reports to the SEC.  Another positive result out of the whistle blower program is organizations implementing predetermined investigative templates and procedures, which will allow companies to act much quicker within the 90-day window in which a whistle blower can secure his standing with the SEC.   Along these lines, many companies have predetermined arrangements with third-party providers, such as law firms and auditors, to avoid any time lag once they receive a report of fraud.

If these corporate reforms continue, I believe that companies will be able to steer fraud reporting to an internal platform and not be as exposed to the SEC whistle blower program as originally feared.  The SEC whistle blower program has to be lauded to the extent that it was the impetus of corporate reform, but further study is needed to determine if the reporting ends with an internal report or continues to actual reporting to the SEC.  Only then can we say that the SEC’s whistler blower program resulted in wide-spread corporate reform