Fraud


- Corporate board members of U.S. public companies are keenly focused on risk, but many are uncomfortable with their understanding of which risks the companies are willing to take, according to PwC survey results.

In the interest of reducing fraud risk, an increasing percentage of board members are:

  • Holding discussions regarding tone at the top (54% in 2014, up from 46% in 2012).
  • Interacting more below the executive level (50% in 2014, up from 31% in 2012).
  • Holding discussions of insider trading controls (33% in 2014, up from 27% in 2012).

Seventy percent of the 863 public company director respondents to the survey serve on boards of companies with more than $1 billion in annual revenue.

While the survey showed that more board members are conducting activities to combat fraud risk, their grasp of companies’ risk appetite has diminished. In 2012, 62% of board members said they understood their company’s risk appetite very well. That percentage dropped to 51% in 2014.

The portion of directors who said they were very satisfied with the information they receive on details of proposed investment strategies such as joint ventures also dropped from 47% in 2013 to 42% this year.

In a time when social media can almost instantly turn an isolated negative event into a worldwide crisis, directors have a much better understanding of their companies’ crisis response communication plan. In 2012, just 43% said they understood their company’s crisis response communication plan very well or moderately well. That percentage grew to 72% in 2014.

 

- The SEC expects to pay an award of more than $30 million to a whistleblower—a total that’s more than twice the previous record payout announced in the commission’s 2-year-old whistleblower program.

An informant living in a foreign country who provided important, original information that led to a successful SEC enforcement action will receive the award. SEC officials said in a news release that the award demonstrates the international reach of the whistleblower program.

As required by the whistleblower program mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, the SEC will not disclose the whistleblower’s name. The program gives the SEC the ability to pay for high-quality, original information that results in SEC enforcement actions with sanctions of more than $1 million.

Whistleblowers can receive 10% to 30% of the money collected in a case. The fund is financed through sanctions paid to the SEC by securities law violators.

The award was the fourth given to a whistleblower living outside the United States.

The previous record for an SEC award to a whistleblower was $14 million, which was given in October 2013. The SEC has been paying monetary awards to whistleblowers since August 2012.

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