Newsflash: OCIE Publishes Risk Alert on Examinations of Compliance with SEC Whistleblower Rule by Investment Advisers and Broker-Dealers

October 27, 2016

The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) issued a National Exam Program Risk Alert on October 24, 2016 (Risk Alert) regarding examinations of registrants’ employment-related documents with respect to provisions that seek to limit: (1) the types of information an employee may provide to the SEC; or (2) the monetary reward a former employee may receive when reporting to the SEC as to possible securities law violations.

The Risk Alert states that, in OCIE staff examinations of registered investment advisers and registered broker-dealers, the staff will review, among other materials, “compliance manuals, codes of ethics, employment agreements, and severance agreements” to determine whether certain provisions in those documents may contravene whistleblower protections set forth in Rule 21F-17 (Whistleblower Rule) under the Securities Exchange Act of 1934. The Risk Alert further cautions that OCIE staff “is citing deficiencies and making referrals to the Division of Enforcement where appropriate.”

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