Ethics Hotlines – Highlight of Regulatory Compliance

A number of laws and other government regulations require or strongly encourage organizations to provide hotlines as part of their ethics and compliance programs. The following selected list will serve as a reminder and a highlight to some of the relevant regulatory requirements.

Federal Acquisition Regulation (FAR): Every organization that hopes to do business with the U.S. Government should be aware of FAR guidelines. Part 52, the largest single section of the FAR, addresses ethics compliance and training requirements. All contracting organizations and in some instances their subcontractors or vendors are required to develop and enforce a written code of business ethics. Most organizations not otherwise categorized as small businesses must provide an ethics hotline or another mechanism for anonymous and confidential reporting, and must offer related ongoing training.

Congress has recently strengthened the provisions related to whistleblower protections for both the Department of Defense and Civilian Agencies.  For the civilian agencies, Congress created a four year pilot program for enhanced whistleblower protection, expanding on coverage that already existed in statute and in FAR 3.9.  The DOD changes are permanent and a final rule changing the DFARS was published earlier this year.

Foreign Corrupt Practices Act (FCPA): If your organization does business with foreign entities, it may well be subject to the provisions of the FCPA. As outlined in the U.S. government’s 2012 Resource Guide to the U.S. Foreign Corrupt Practices Act, covered organizations must offer a mechanism for an organization’s employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation. An anonymous hotline is an example of such a mechanism.

Sarbanes-Oxley Act (SOX): Section 301 of the Sarbanes-Oxley Act requires publicly traded U.S. companies to set up hotlines or other mechanisms for the “confidential, anonymous submission of employee complaints and concern” about “questionable accounting or auditing matters. It is important to realize that hotline provision applies to an organization’s operations worldwide, if it has them.

U.S. Federal Sentencing Guidelines: Organizational sentencing guidelines, as defined in Chapter 8 of the Federal Sentencing Guidelines, can make an organization criminally liable for the acts of its employees. However, resulting penalties can be mitigated if the organization has put in place an effective compliance program, to include “systems for monitoring, auditing, and reporting suspected wrongdoing without fear of reprisal.” An anonymous hotline is an example of such a system.

Want to learn more? Ethical Advocate has collected a wide range of useful links to assist you in understanding your anonymous reporting requirements and responsibilities. Please feel free to contact us for more information.