Tag Archives: Accountant

The CAQ – Why You Need to Know Who They Are!

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Do you know where the SEC initially stated their position about transitioning to the 2013 Revised COSO framework? It was in September of 2013. Here is the path to that announcement.

One of the topics we discuss in our workshops is the importance of the “CAQ” in the financial reporting process. The CAQ is an important source of information about current positions and developments at the SEC. Surprisingly, we frequently discover that many people are not very familiar with this organization.

So, what is the CAQ? It is, in long form, The Center For Audit Quality.

Their web page is thecaq.org

At their home page you can learn about who they are:

“The Center is an autonomous, nonpartisan, nonprofit group based in Washington, D.C. It is governed by a Board that comprises leaders from the public company auditing firms, the American Institute of CPAs and three members from outside the public company auditing profession. The organization is affiliated with the American Institute of CPAs.”

And what they do:

“The Center for Audit Quality is dedicated to enhancing investor confidence and public trust in the global capital markets by:

  • Fostering high quality performance by public company auditors;
  • Convening and collaborating with other stakeholders to advance the discussion of critical issues requiring action and intervention;
  • Advocating policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions.”

One really important part of this organization is The CAQ SEC Regulations Committee. This group meets periodically with the SEC staff, generally once each quarter for the first three quarters of the year, and discusses current accounting and disclosure issues. The home page for the committee is:

thecaq.org/resources/caq-committees/sec-regulations

The minutes of these meetings are published on the Committee’s webpage and frequently contain information that, while sometimes fairly narrow, is helpful in the financial reporting process.

For example, it was at a CAQ meeting that the SEC Staff early on stated their position about the transition to the 2013 COSO Framework. Here is a link to those minutes: (Check out page 6)

thecaq.org/docs/reports-and publications/2013septembe25jointmeetinghls.pdf?sfvrsn=0

The most recent highlights of the SEC Regulations Committee meeting with the Staff are at:

www.thecaq.org/docs/default-source/sec-regulation-committee-hightlights/sec-regulations-committee-highlights-march-31-2015.pdf?sfvrsn=0

This meeting addressed issues ranging from the reporting implications of the FASB’s new consolidation standard, ASU 2015-02, to the application of S-X Rule 3-14 to real estate acquisitions in prior years for a registration statement.

Yes, many of the issues are narrow and technical, but we suggest you check the CAQ minutes each quarter as you get ready to close!

As usual, your comments and thoughts are appreciated!

SEC Comment of the Week: To GAAP or non-GAAP, aye, that is the question….

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Or – There is more than Reg G!

The use of Non-GAAP financial measures has a long and storied history. Non-GAAP disclosures always seem to engender controversy and questions. While there is no doubt that they are widely used and important to many investors, unfortunately they are sometimes misused, and can even result in enforcement action. Check out this enforcement release against Trump Hotels and casinos as a great example of what not to do:

www.sec.gov/news/headlines/trumphotels.htm

During our workshops we frequently find that there is more than a bit of confusion over the SEC’s guidance for the use of non-GAAP measures. Most SEC Reporting professionals know about “Reg G” and it’s guidance, but that is not the only place the SEC has non-GAAP measure rules. (Note: It was in 2002 that the Title IV of the SOX Act gave the SEC the power and responsibility to regulate the use of “pro forma figures”, later renamed non-GAAP measures.)

Regulation G is the SEC rule that applies when a non-GAAP measure is included in a document that is not filed with the SEC such as an earnings release.

Regulation S-K Item 10(e), which is not as well understood, is additional guidance that must be followed if a non-GAAP measure is included in a filed document, such as in MD&A in Form 10-K and 10-Q or in CD&A in a proxy statement.

This difference is not always well understood and does result in SEC Comments. (There is an example comment to a company that did not follow S-K Item 10’s guidance below)

What is the Difference?

Reg G, the rule for non-filed documents such as an earnings release or an investor presentation, is in essence very simple. You can find Reg G at:

www.ecfr.gov/cgi-bin/text-idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17:4.0.1.1.5&rgn=div5

The nuts and bolts of Reg G are fairly straightforward:

“(a) Whenever a registrant, or person acting on its behalf, publicly discloses material information that includes a non-GAAP financial measure, the registrant must accompany that non-GAAP financial measure with:

(1) A presentation of the most directly comparable financial measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP); and

(2) A reconciliation (by schedule or other clearly understandable method), which shall be quantitative for historical non-GAAP measures presented, and quantitative, to the extent available without unreasonable efforts, for forward-looking information, of the differences between the non-GAAP financial measure disclosed or released with the most comparable financial measure or measures calculated and presented in accordance with GAAP identified in paragraph (a)(1) of this section.”

There is also an anti-fraud provision to prevent measures that are misleading. A company cannot knowingly lie or omit a material fact in disclosure of a non-GAAP measure. The definition of a non-GAAP measure is also in the rule. (We will explore this definition in our next post!)

Regulation S-K item 10 (e), the source of guidance for non-GAAP measures used in filed documents, has more required disclosure about “why’s” behind the use of non-GAAP measures and some specific rules about things that can’t be done with non-GAAP measures. It does require essentially the same things as Reg G, but then adds additional requirements. Here is its core:

First, if a company uses a non-GAAP measure in a filed document, S-K Item 10(e) requires four things:

“(A) A presentation, with equal or greater prominence, of the most directly comparable financial measure or measures calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP);

(B) A reconciliation (by schedule or other clearly understandable method), which shall be quantitative for historical non-GAAP measures presented, and quantitative, to the extent available without unreasonable efforts, for forward-looking information, of the differences between the non-GAAP financial measure disclosed or released with the most directly comparable financial measure or measures calculated and presented in accordance with GAAP identified in paragraph (e)(1)(i)(A) of this section;

(C) A statement disclosing the reasons why the registrant’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the registrant’s financial condition and results of operations; and

(D) To the extent material, a statement disclosing the additional purposes, if any, for which the registrant’s management uses the non-GAAP financial measure that are not disclosed pursuant to paragraph (e)(1)(i)(C) of this section”

In addition to these four requirements, the first two of which are almost the same as Reg G, S-K Item 10 has five prohibitions. A company cannot:

(A) Exclude charges or liabilities that required, or will require, cash settlement, or would have required cash settlement absent an ability to settle in another manner, from non-GAAP liquidity measures, other than the measures earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation, and amortization (EBITDA);

(B) Adjust a non-GAAP performance measure to eliminate or smooth items identified as non-recurring, infrequent or unusual, when the nature of the charge or gain is such that it is reasonably likely to recur within two years or there was a similar charge or gain within the prior two years;

(C) Present non-GAAP financial measures on the face of the registrant’s financial statements prepared in accordance with GAAP or in the accompanying notes;

(D) Present non-GAAP financial measures on the face of any pro forma financial information required to be disclosed by Article 11 of Regulation S-X (17 CFR 210.11-01 through 210.11-03); or

(E) Use titles or descriptions of non-GAAP financial measures that are the same as, or confusingly similar to, titles or descriptions used for GAAP financial measures…

So far we have discussed and recapped a lot of information. All of that leads to this example SEC staff comment about the use of non-GAAP measures.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 27

  1. We note that you present certain non-GAAP financial measures, including constant currency revenues, gross profit excluding the impacts of the MDP transaction and the exchange, SG&A expense excluding certain costs as a percentage of revenue, and consolidated adjusted EBITDA. Please revise future filings to include all of the disclosures required by Item 10(e)(1)(i) of Regulation S-K for all non-GAAP measures included in your presentation.

This one is as simple as knowing the difference between Reg G and S-K Item 10!

As always, your thoughts and comments are appreciated!

It’s Conference Time!

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Our four Midyear SEC and FASB Forums are underway! This picture is from our Chicago Conference on May 28 and 29. In June the Forums will take place in New York and San Francisco. Check out the dates, agenda and speakers at:

http://www.pli.edu/Content/30th_Midyear_SEC_Reporting_FASB_Forum/_/N-1z12892Z4k?ID=231682

All the programs are chaired by Carol Stacey and bring you up to date with all important developments and current issues at the SEC, FASB and PCAOB.

10-K Tip – Another S-K Item 201 Oddity

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Over the years S-K Item 201 has been amended, updated and added to on several occasions. As a result it has become a bit of a disclosure hodge-podge. It contains more than a few twists and turns, and we explored one of them in our last post about the performance graph from S-K item 201(e) that does not have to be in the Form 10-K.

This post is about another twisty disclosure rule, and is also a reminder that the Compliance and Disclosure Interpretations from CorpFin can be really helpful. You can find them all at:

www.sec.gov/divisions/corpfin/cfguidance.shtml#

This S-K Item 201 twist surrounds the equity compensation table that is required by S-K 201(d). At first reading, you would not think there is even an issue. The instructions to Form 10-K seem clear:

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)  Furnish the information required by Item 201 of Regulation S-K (17 CFR 229.201) and …(rest of the instruction omitted as it is not relevant).

With this straightforward instruction it would seem everything required by S-K Item 201 should be included in Item 5 of the 10-K, including S-K 201(d):

(d) Securities authorized for issuance under equity compensation plans
(1) In the following tabular format, provide the information specified in paragraph (d)(2) of this Item as of the end of the most recently completed fiscal year with respect to compensation plans (including individual compensation arrangements) under which equity securities of the registrant are authorized for issuance, aggregated as follows:

(i) All compensation plans previously approved by security holders; and
(ii) All compensation plans not previously approved by security holders.

However, this seemingly straightforward issue gets disrupted when you get to Item 12 in the Form 10-K instructions which says:

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Furnish the information required by Item 201(d) of Regulation S-K (§ 229.201(d) of this chapter) and Item 403 of Regulation S-K (§ 229.403 of this chapter).

So, where is the appropriate place in the Form 10-K for this table? For a while many people read the instructions very literally and put the table in both Item 5 and Item 12! Eventually the common sense approach of the SEC, i.e. you don’t really need it twice, was clarified in this Compliance and Disclosure Interpretation:

Regulation S-K: Section 106. Item 201 — Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Question 106.01

Question: Is the Item 201(d) disclosure required in Part II of Form 10-K, given that Item 5 of Form 10-K indicates that the registrant is required to furnish the information required under Item 201, or should the Item 201(d) disclosure be included (or incorporated by reference) in Part III of Form 10-K given that Item 12 indicates that the registrant is required to furnish the information required under Item 201(d)?

Answer: The Item 201(d) disclosure should be included in Part III, Item 12 of Form 10-K. An issuer may rely on General Instruction G.3 to Form 10-K to incorporate by reference the Item 201(d) disclosure from its proxy statement or information statement, even if the issuer did not submit a compensation plan for security holder action at its annual meeting of security holders. See American Bar Association (Jan. 30, 2004). [Mar. 13, 2007]

This one is pretty picky, but always good to get the details right! It also shows one facet of the SEC staff’s interpretive process, as the CDI resulted from an interpretive request from the ABA, which is linked to Reg S-K’s CDI 106.1.

As always your thoughts and comments are welcome!

 

Form 10-K Tip – A Subtle Filed Versus Furnished Issue

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In our previous two posts dealing with the differences between the Form 10-K and the Annual Report to Shareholders (the ARS that accompanies the proxy), we delved into the differences between “filed” and “furnished” documents.

Here is another fairly subtle place that this “filed versus furnished” distinction comes into Form 10-K.

Regulation S-K Item 201(e) is the source of the requirement for the “performance graph” which does a five-year comparison of the return on a $100 investment in the company’s stock, a broad market index and an industry index. (The text of Item 201(e) is included below).

Here is an example of the graph from American Woodmark:

From this part of the Instructions to Item 5 of the Form 10-K it seems relatively straightforward that this graph should be in Item 5 of the 10-K:

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

  1. (a)  Furnish the information required by Item 201 of Regulation S-K (17 CFR 229.201)…

(Note: The rest of the Item 5 instructions are omitted as they do not affect this issue)

However, if you persevere (that is stay awake!) trying to read the whole of S-K Item 201, including the instructions (always an important part of the items!) you will find Instruction 7 to Item 201(e):

  1. The information required by paragraph (e) of this Item need not be provided in any filings other than an annual report to security holders required by Exchange Act Rule 14a-3 (17 CFR 240.14a-3) or Exchange Act Rule 14c-3 (17 CFR 240.14c-3) that precedes or accompanies a registrant’s proxy or information statement relating to an annual meeting of security holders at which directors are to be elected (or special meeting or written consents in lieu of such meeting). Such information will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

The reason for this instruction goes back many years to when changes were made in the proxy rules and this graph was moved from the proxy statement to S-K Item 201.

And, as you read this instruction, you might be tempted to say “so what”! But the subtle and important issue is that the ARS is not a filed document!

So, if you put the graph in the Form 10-K, it is “filed” information, subject to 1934 Act liability provisions. However, if you put it only in the ARS, it is not subject to 1934 Act liability. While this might not be a major issue, it is still one to think about.

One path some companies use is to put the graph on the back page of a 10-K wrap, so it is not actually included in the 10-K itself.

Here is an example of a company, American Woodmark, that dealt with the issue by putting the graph in the 10-K wrap pages instead of the Form 10-K, in order to keep the graph from being filed. Check out page 12 of their ARS:

files.shareholder.com/downloads/AMWD/144697083x0x766550/DAD863ED-7D03-468B-BCCE-E5117F2C1E43/LowRes-14-10531-FSC_AWC-FinalPDF.pdf

Yes, this one is pretty subtle, even picky, but one to think about.

As always, your comments and thoughts are welcome!

Here is the main part text of S-K Item 201(e). You can see the whole Item at:

www.ecfr.gov/cgi-bin/text-idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17:3.0.1.1.11&rgn=div5#se17.3.229_1201

S-K Item 201

(e) Performance graph. (1) Provide a line graph comparing the yearly percentage change in the registrant’s cumulative total shareholder return on a class of common stock registered under section 12 of the Exchange Act (as measured by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the registrant’s share price at the end and the beginning of the measurement period; by the share price at the beginning of the measurement period) with:

(i) The cumulative total return of a broad equity market index assuming reinvestment of dividends, that includes companies whose equity securities are traded on the same exchange or are of comparable market capitalization; provided, however, that if the registrant is a company within the Standard & Poor’s 500 Stock Index, the registrant must use that index; and

(ii) The cumulative total return, assuming reinvestment of dividends, of:

(A) A published industry or line-of-business index;

(B) Peer issuer(s) selected in good faith. If the registrant does not select its peer issuer(s) on an industry or line-of-business basis, the registrant shall disclose the basis for its selection; or

(C) Issuer(s) with similar market capitalization(s), but only if the registrant does not use a published industry or line-of-business index and does not believe it can reasonably identify a peer group. If the registrant uses this alternative, the graph shall be accompanied by a statement of the reasons for this selection.

Leases Update – Final Standard Drafting Underway!

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For years we have been watching the FASB/IASB project on lease accounting. And many of us wonder whether or not this project will ever finish. Well, checkout what the FASB is saying about their meeting this Wednesday, May 13. Yes, they are working on the project, working on it carefully and diligently and are actually in the process of drafting a final standard!

Wednesday May 13. 2015:

FASB Board Meeting, 9:00 a.m. EDT

  1. Leases. The Board will continue redeliberations of its May 2013 Exposure Draft, Leases, specifically discussing issues that have arisen during the drafting of the final standard.

They have said they hope to issue the final standard before the end of this year!

You can learn more at:

www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220079452

As always, your thoughts and comments are welcome and appreciated!

30th Midyear SEC Reporting & FASB Forum

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For the 30th straight year our “Midyear SEC Reporting & FASB Forums” are being presented during May and June in Dallas, Chicago, New York, and San Francisco. These  programs are always the best way to keep up-to-date with what is going on at the SEC and the FASB. You can see the detailed agenda and list of speakers and learn more at:

www.pli.edu/Content/30th_Midyear_SEC_Reporting_FASB_Forum/_/N-1z12892Z4k?ID=231680

Past participants are eligible for a discount. Please contact customer service at (888) 212-2010 or Secinstitute@pli.edu.

As always, your thoughts a comments are appreciated!

The Mystery of Filed versus Furnished

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In our last post we explored the difference between the Annual Report to Shareholders (ARS) and the Form 10-K. The ARS, required by the proxy rules, is an example of a document that is “furnished” to shareholders and not actually “filed” with the SEC.

Just what does this mean?

Filed versus furnished is essentially a legal distinction. It does not impact how information appears on the EDGAR system (as they look the same) or other practical filing issues (as they are filed in EDGAR the same way). For example, an Item 2.02 Form 8-K is a “furnished” document, but an Item 2.01 Form 8-K is a “filed” document. To learn what is going on with this distinction, let’s explore:

  1. What is the legal difference?
  2. How to determine if a document is furnished or filed?

Filed

When a document is “filed” it is formally “filed” with the SEC to meet the disclosure requirements under the laws the SEC administers, principally the 1933 and 1934 Acts. This means a “filed” document is subject to the liability provisions of the Acts, and is the principal difference between filed versus furnished.

Furnished

When a document is furnished, generally to shareholders, it is not actually filed with the SEC under one of the Acts, (even though it may be “filed” in the EDGAR system) so it is not subject to the liability provisions of the Acts.

This liability difference can be a substantial issue. For example, it is far easier to establish scienter in a 34 Act fraud case then in a non-34 Act fraud case. Generally in a non-34 Act action, to establish scienter it must be shown that the accused deliberately set out to cause harm. In a 34 Act action, gross negligence or reckless disregard can establish scienter, a much lower level of proof.

Another difference – if something is furnished rather than filed, it cannot be incorporated by reference into later filings. In the shelf registration process this is very important as furnished documents are not incorporated by reference into the S-3 on the shelf, and hence do not expose the company to the strict liability standards of the 33 Act! And, if you do later incorporate a furnished document into a filed document, it loses its furnished status, usually not a good thing!

So, how do you tell if something is filed or furnished? When they appear on the EDGAR system they look exactly the same! As discussed earlier, it is really a legal distinction, so you go back to the legal sources, in particular, the instructions to the forms.

Here is an excerpt from the Form 8-K instructions:

  1. The information in a report furnished pursuant to Item 2.02 (Results of Operations and Financial Condition) or Item 7.01 (Regulation FD Disclosure) shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, unless the registrant specifically states that the information is to be considered “filed” under the Exchange Act or incorporates it by reference into a filing under the Securities Act or the Exchange Act.

So, this legal distinction is actually spelled out in the instructions.

As a concluding thought, the most commonly encountered furnished documents are:

The Annual Report to Shareholders
Form 8-K Item 2.02
Form 8-K Item 7.01

There are others, so when in doubt, consult the instructions!

As a preview for our next topic in this discussion, check out the furnished versus filed status of the performance graph required by Regulation S-K Item 201(e). You may find that a surprise awaits!

 

10-K Tip of the Week – Annual Report to Shareholders vs Form 10-K

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In sort of a lighthearted way this week’s Tip is a “versus” tip. With big boxing matches coming up next week, or perhaps just remembering old movies with aliens and monsters, the issue of how the Form 10-K works versus how the Annual Report to Shareholders (ARS) works seems appropriate.

This question frequently comes up in our workshops, and many folks don’t know whether or not the ARS is actually required or where to find the ARS requirements. The ARS is actually a very distinct and separate document from the Form 10-K.

The Form 10-K is the Annual Report to the SEC. It is required by the rules of the SEC and is filed with the SEC. As such, it is not a document furnished directly to shareholders, although they clearly have an opportunity to use the information as it is publicly accessible.

The ARS is actually required by the proxy rules. Rule 14a-3, which deals with information that must be furnished to shareholders in the proxy solicitation process says:

“(b) If the solicitation is made on behalf of the registrant, other than an investment company registered under the Investment Company Act of 1940, and relates to an annual (or special meeting in lieu of the annual) meeting of security holders, or written consent in lieu of such meeting, at which directors are to be elected, each proxy statement furnished pursuant to paragraph (a) of this section shall be accompanied or preceded by an annual report to security holders …….”

When a company is having its annual meeting and will elect directors at this meeting, it must furnish each shareholder with the proxy statement containing information about the election and officers and directors, and also must furnish each shareholder the ARS.

The next logical question is what must be included in the ARS? Rule 14a-3 enumerates the requirements and they include, among lots of other information:

Financial statements
MD&A
Selected financial data

“a brief description of the business done by the registrant and its subsidiaries during the most recent fiscal year which will, in the opinion of management, indicate the general nature and scope of the business of the registrant and its subsidiaries”

For a complete list of all the required information in the ARS check out Rule 14a-3. It is on page 890 of our 2015 SEC Handbook and you can also find it here:

www.ecfr.gov/cgi-bin/text-idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17:4.0.1.1.1&rgn=div5#se17.4.240_114a_63

Way back many years ago most companies did a separate ARS which was mailed in paper form to all shareholders along with the proxy statement. To see an example of this kind of traditional ARS check out this one from American Woodmark, a cabinet manufacturer:

files.shareholder.com/downloads/AMWD/107569654x0x673718/998BA1D0-743B-4BEC-A32F-8B7197D3B622/LowRes-13-10246_AWC-2013.pdf

The above link is to the ARS American Woodmark prepared for 2013, and it has wonderful photography and nicely typeset financial statements and MD&A. It is almost elegant in its presentation of information about the company. It is also a very expensive document to produce!

Because this kind of ARS is so expensive, many companies use a more cost effective ARS called the “10-K wrap”. This version of the ARS is actually a cover and perhaps a few pages of financial and company background “wrapped” around the Form 10-K. This approach works well because all the information required by rule 14a-3 that must be furnished to shareholders is in the Form 10-K.

American Woodmark switched to the 10-K wrap approach in 2014. You can find their 2014 ARS at:

files.shareholder.com/downloads/AMWD/107569654x0x766550/DAD863ED-7D03-468B-BCCE-E5117F2C1E43/LowRes-14-10531-FSC_AWC-FinalPDF.pdf

It would be interesting to know how much money American Woodmark saved going from the “pretty picture” ARS to the “10-K wrap” ARS!

To summarize, the Form 10-K is the formal annual report filed with the SEC as part of complying with the 34 Act, while the ARS is not filed with the SEC, it is actually furnished to shareholders.

(The proxy rules do require that copies of the ARS be sent to the SEC, one of the few paper filings companies still have to make.)

Lastly, if you are focusing on the words filed versus furnished in the above sentence, yes, they are very important and mean very different things! We will discuss that difference in our next post!

As always, your comments and thoughts are welcome and appreciated!

The Whistleblower’s Saga

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Whistleblowers are much in the news. With stories ranging from Jim Marchese of “Real Housewives of New Jersey” fame collecting his second whistleblower legal settlement, to the SEC announcing a $1 million dollar whistleblower payout to a compliance officer, the volume of whistleblower activity is clearly increasing.

(The SEC Release is at:

www.sec.gov/news/pressrelease/2015-73.html )

Whistleblowers clearly play a key role in the detection of fraud. The SEC’s Office of the Whistleblower says: “Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission”.

If you would like to get to the story of how blowing the whistle affected one person’s life and career, skip to the links at the end of this entry. But first, here is some background about how regulators have tried to create paths for whistleblowers.

Congress has built ways for whistleblowers to do what their label says, blow the whistle when they find something that is wrong, a major focus in the efforts to combat fraud.

The Sarbanes-Oxley act created a whistleblower’s hotline to the audit committee and required that whistleblowers be able to blow the whistle anonymously. The Dodd-Frank Act created a separate incentivized hotline directly to the SEC. A whistleblower using the Dodd-Frank hotline can also remain anonymous and may even be entitled to cash rewards if the matter about which they blow the whistle results in penalties against the company.

Importantly, companies are not allowed to try and restrict employees in blowing the whistle. This is an important enough issue that the SEC has enforced against companies and levied fines when companies try to limit how employees can contact the SEC. A very recent example is against KBR’s use of a confidentiality agreement containing overly restrictive language, summarized at:

www.sec.gov/news/pressrelease/2015-54.html#.VRw2AzbD_cs

You can learn more about the Dodd-Frank hotline and the SEC’s Office of the Whistleblower at:

www.sec.gov/whistleblower

One would think with all this legislative and SEC support being a whistleblower is becoming an easier path to walk. However, it is still true that few events in a persons professional career are more stressful and disruptive than blowing the whistle.

Marketplace and Propublica have put together an interesting study of how one whistleblower’s path unfolded. It is a great example with lots of gray issues, a prolonged period of uncertainty, and many other complications. You can read and hear about it at:

www.marketplace.org/topics/business/whistleblowers-tale-how-accountant-took-halliburton

www.propublica.org/article/the-whistleblowers-tale-how-an-accountant-took-on-halliburton