Dodd-Frank Act Whistleblower Law Once Again Under Attack by Corporate America
The U.S. Securities and Exchange Commission is set to enact rule changes advocated by the corporate lobby, which will discourage whistleblowers from reporting securities fraud, the Associated Press (AP) reports.
SEC whistleblower attorney Stephen M. Kohn told the AP the changes are “counter to every whistleblower law, rule, and policy.” Kohn, Chairman of the National Whistleblower Center and a partner in the law firm Kohn, Kohn & Colapinto, said the changes “Would destroy the program.”
The proposal would give the SEC discretion to set caps to whistleblower rewards, among other changes. Whistleblower advocates point out that lowering payouts will discourage employees from reporting major. The payment for successful cases is now 10% to 30% of fines or proceeds collected by the SEC.
The rule change would also require the filing of a TCR to receive legal protection and qualify for a reward. The filing of a TCR would override any other form of contact with the Commission. “Under the proposed rule, if a whistleblower gave the Chairman of the SEC original information about a fraud, and later filed the TCR application, that whistleblower would be automatically disqualified from participating in the SEC’s mandatory reward program. This requirement will have a catastrophic impact on whistleblowers,” Kohn warned. The proposal also runs directly counter to the rules governing the False Claims Act and the IRS whistleblower programs.
The SEC whistleblower program was established by Congress to incentivize whistleblowers with specific, timely, and credible information about federal securities laws violations to report to the SEC. Since the program began in 2011, whistleblowers have helped the SEC recover over $1.7 billion in sanctions from wrongdoers. These sanctions include more than $901 million in disgorgement of ill-gotten gains and interest, of which approximately $452 million has been, or is scheduled to be, returned to harmed investors. In other words, the program is working and working very well.
“Whistleblowers are the defenders of taxpayers, shareholders, and consumers,” Sen. Ron Wyden of Oregon told the AP in a statement. “Whistleblowers shouldn’t be punished because they don’t file a specific form at a specific time when they are putting themselves at personal and financial risk by blowing the whistle. The SEC ought to be encouraging whistleblowers to come forward and not place requirements to fill out government paperwork in their way.”
Kohn, Kohn and Colapinto filed detailed rulemaking comments on the proposed Dodd-Frank Act whistleblower reward program:
Resources for SEC Whistleblowers: