The House Financial Services Committee has referred a bill to the full House that would give audit regulators a whistleblower system under Sarbanes-Oxley.
Introduced by Rep. Sylvia Garcia (D-Texas), the PCAOB Whistleblower Protection Act of 2019 would establish a whistleblower program for the Public Company Accounting Oversight Board much like that already operating at the Securities and Exchange Commission.
Congress created the SEC whistleblower program under Dodd-Frank to authorize the SEC to award those who came forward with original information related to securities law violations. The SEC is looking for tips on all nature of fraud, theft, bribery, manipulation, or false statements that might create unfair advantages in capital markets.
The SEC is authorized to award whistleblowers between 10 percent and 30 percent of sanctions reaching at least $1 million. Since issuing its first award in 2012, the SEC has doled out more than $300 million to whistleblowers whose tips have so far produced more than $2 billion in financial remedies. The largest award, $50 million, was shared by two whistleblowers in 2018.
The proposed PCAOB whistleblower act would authorize the PCAOB to reward whistleblowers with payouts of 10 percent to 50 percent on sanctions as small as $2,500. The program would award whistleblowers who share original information with the board that leads to enforcement actions related to violations of the PCAOB’s standards and rules.
The PCAOB had no comment on the legislation, but its enforcement leaders are likely even more eager to see action on a Senate bill that would lift the veil of privacy hiding its disciplinary proceedings from public view. Sen. Jack Reed (D-R.I.) reintroduced legislation now awaiting action in the Committee on Banking, Housing, and Urban Affairs that would permit the PCAOB to perform its disciplinary proceedings in public.
Sarbanes-Oxley requires that parties to enforcement actions consent to public disclosure before matters are fully settled. The PCAOB has said historically that incentivizes those who are accused of wrongdoing to drag out actions with appeals and other procedural tactics to stall any public disclosure until long after an alleged violation might have occurred.
In reintroducing the bill, Reed said such privacy over PCAOB proceedings is different from nearly all other regulatory bodies, including the SEC, the Financial Industry Regulatory Authority, the Federal Deposit Insurance Corp., the U.S. Commodity Futures Trading Commission, and the U.S. Department of Labor, among others. The bill has been introduced in Congress before but failed to gain traction.