The House voted to approve legislation to create a whistleblower program at the Public Company Accounting Oversight Board similar to the one at the Securities and Exchange Commission, offering whistleblower protection to accountants and auditors, and others who know of accounting fraud.
The bill would protect whistleblowers with legitimate information that can lead to enforcement action by the PCAOB and provide them with awards for information that leads to penalties of more than $2,500.
“The PCAOB Whistleblower Protection Act of 2019 is a good first step in ensuring the proper oversight of audits of public companies,” said Rep. Syliva Garcia, D-Texas, who introduced the bill this year. “This is one tool in the toolbox of protecting the stability and transparency of our public markets and ensuring the investor faith it generates continues. The PCAOB was originally established to ensure the proper oversight of audits of public companies. This was done after the implosion of Enron and their accounting firm Arthur Anderson, which was damaging to my district in Houston. I am proud of this bill and what it will do to ensure that the PCAOB functions properly and protects consumers and workers from bad actors that could jeopardize the future stability of our public markets.”
The PCAOB already has a Tip Referral Center that allows whistleblowers to file a complaint or provide a tip or referral on potential violations of law or PCAOB rules by a registered accounting firm or people associated with the firm, as well as provide information that may be relevant to a PCAOB inspection of a public accounting firm or people associated with the firm, and offer information relevant to the PCAOB’s oversight responsibilities.
The National Whistleblower Center, which supported the bill, noted in a summary of the bill’s provisions that those categories would remain the same, but the legislation would strengthen the existing anonymity provision, as well as add an anti-retaliatory policy, and establish a whistleblower rewards program.
The PCAOB Whistleblower Protection Act would create a whistleblower program for the PCAOB and offer incentives through rewards and protection from retaliation, while complementing the SEC’s existing whistleblower program. The bill applies to cases that would lead to “monetary sanctions exceeding $2,500.” To be eligible for a reward, a whistleblower would have to submit original information deriving from independent knowledge or analysis and not otherwise known to the PCAOB. Whistleblowers would be able to qualify for rewards based on a percentage of the total monetary amount recovered by the PCAOB, due directly to the whistleblower’s tip, of no less than 10 percent and no greater than 50 percent.
The confidentiality of whistleblowers would be protected under the bill. The PCAOB and any officer or employee of the PCAOB would not be able to disclose any information without the written consent of the whistleblower. A whistleblower who knows of fraud would be able to submit a tip to the PCAOB through a lawyer without disclosing their identity, but the PCAOB would be able to verify the whistleblower’s identity before providing an award.
The House passed the bill on Friday, but it hasn’t yet been taken up by the Senate.
The U.S. Chamber of Commerce has opposed the bill. “H.R. 3625 would establish a duplicative and flawed whistleblower reward program at the Public Company Accounting Oversight Board (PCAOB),” wrote executive vice president and chief policy officer Neil L. Bradley in a letter to Congress last week. “The 2002 Sarbanes-Oxley Act and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act both established whistleblower protection programs for those who report on wrongdoing at publicly traded companies, so it is unclear what benefit would derive from a new program at the PCAOB. The PCAOB and audit firms already have tip programs and quality control procedures. H.R. 3625 could also divert a substantial sum of monies from accounting scholarships designed to improve audit quality. This bill also lacks a ‘no amnesty, clause to ensure that a culpable individual would not automatically become exempt from an enforcement action if they report wrongdoing through the whistleblower program.”