Proposed Changes to the Dodd-Frank Act Whistleblower Law
Will Destroy Key Protections
Washington D.C. October 18, 2019. The U.S. Securities and Exchange Commission (“SEC” or “Commission”) will meet at 10 a.m. on October 23, 2019, to vote on proposed changes to the SEC’s highly successful Dodd-Frank Act whistleblower reward program. If approved, the proposed changes will destroy vital Wall Street whistleblower protections, undermine the whistleblower reward law, and place investors at significant risk to be harmed by increased frauds.
The whistleblower rights law firm of Kohn, Kohn and Colapinto has taken a leadership role in trying to
convince the SEC Commissioners to reject all of the anti-whistleblower
proposals. Over the past week, whistleblower attorneys from the firm have met
with members of the Commission and their staffs. Joining the KKC attorneys at
these meetings were representatives from the National Whistleblower Center and ENRON whistleblower/Time Magazine Person of the Year Sherron Watkins.
KKC partner Stephen
M. Kohn met directly
with Commissioners Robert J. Jackson, Jr., Allison Herren Lee, and Hester M.
Peirce, and with the staffs from Chairman Jay Clayton and Commissioner Elad L.
Roisman on October 9-10, 2019 to discuss the proposed changes.
“The Commissioners and their staffs were open to
hearing our concerns. We sincerely hope that the Commission does not approve
the rules as originally proposed. The changes will cause untold harm to
whistleblowers and undermine the current SEC program,” stated Kohn.
“We are particularly concerned over two proposed rules.
The first would disqualify numerous whistleblowers who contact the Commission
with highly valuable information on securities frauds. The second would
disincentivize highly placed executives from blowing the whistle on major
frauds by reducing the amount of compensation in large fraud cases,” Kohn
“It is not surprising that Wall Street strongly
supports the radical re-writing of the Dodd-Frank Act. Since the law was
passed, Wall Street has heavily lobbied to strip the SEC whistleblower law of
its most vital components,” Kohn added.
The success of the current program is highlighted in the
Whistleblower Office’s Annual Report. Since 2011, the SEC has recovered over $1.7
billion in sanctions from fraudsters in whistleblower cases and paid the
whistleblowers over $325 million in awards.
The importance of incentivizing whistleblowers was
affirmed by the former Chairman of the Commission, Mary Jo White, in Remarks
at the Securities Enforcement Forum:
“[Whistleblower rewards] persuade people to step
“They put fraudulent conduct on our radar that we
may not have found ourselves, or as quickly.
“And they deter wrongdoing by making would-be
violators ask themselves – who else is watching me?
“The program also incentivizes companies to report
misconduct before a whistleblower comes to us first.
“We believe this program is already a success. And,
as more awards are made, we expect more people to come forward, which will
dramatically broaden our presence.”
“If approved, the proposed rules will undermine the
most successful program protecting investors from frauds. We hope the new
Commissioners, appointed by President Trump, will reject every pending proposal
that will undermine the program,” Kohn said.
The SEC’s Notice of Public Meeting to vote on the
proposed rules is linked here.
Kohn, Kohn and Colapinto detailed rulemaking comments on
the proposed Dodd-Frank Act whistleblower reward program:
National Whistleblower Center and Senator Grassley
Letters to SEC on the Proposed Rule:
Speech of former SEC Chairman Mary Jo White, “The SEC as the Whistleblower’s Advocate. ”
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Photo Credit Scott S.