SEC Rejects Major Anti-Whistleblower Rule Changes

Today, the U.S. Securities and Exchange Commission approved changes to its highly successful whistleblower program in a 3-2 vote.

Based on the public comments made by the Commissioners at today’s meeting, Stephen M. Kohn, a leading whistleblower attorney at Kohn, Kohn & Colapinto and the Chairman of the Board of Directors of the National Whistleblower Center, issued the following statement:

“Whistleblowers scored a major victory today when the SEC backed down from two proposals that would have devastated its whistleblower reward program. The Commission did not approve proposals that would have triggered an automatic reduction in the amount of rewards issued in large enforcement actions. However, the dissents of Commissioners Lee and Crenshaw demonstrate that significant issues remain that could impact the program.”

“The Commission also changed a proposal that would have disqualified countless numbers of whistleblowers who simply failed to file a mandatory form. The Commission modified its proposal to ensure that qualified whistleblowers would remain eligible despite minor technical deficiencies.”

“Significantly, every Commissioner, regardless of political party, strongly praised the SEC’s Dodd-Frank Act’s whistleblower law, recognizing the importance of paying awards to whistleblowers and the invaluable contributions whistleblowers make to protecting investors. The unanimity of support for the basic principles underlying the whistleblower reward law sends a powerful message to Wall Street. Despite their best efforts to undermine whistleblower protections, the worst features contained in the proposed rule changes were not implemented.”

“Although the program was not gutted, the dissents from two Commissioners demonstrate that work needs to be done to ensure that whistleblowers are fully protected and the intent of Congress is achieved. We will continue to work with Congress and the Commission to make sure this highly effective programs works for every qualified whistleblower.”

“We are extremely troubled by the Commission’s adoption of a “related action” rule that is contrary to the statute and public interest. The rule as approved opens the door to stripping whistleblowers from obtaining rewards under numerous laws administered by other agencies. Congress wanted to ensure that this type of shell game could not be played to the determent of whistleblowers. We expect that this provision will be challenged in court.”

The final rule and comment is 191 pages long, linked here. A new statement will be issued once this has been studied.