On Monday, the U.S. Securities and Exchange Commission announced the cancelation of Wednesday’s meeting on proposed changes to its whistleblower program. The meeting is expected to be rescheduled in November.
Stephen M. Kohn, chair of the National Whistleblower Center board, issued a statement: ” We welcome the postponement of the October 23rd meeting. It is vitally important that the SEC understands all of the issues and gets this rulemaking right.”
In a related development, Sen. Charles Grassley on Tuesday spoke on the Senate floor about a bill he introduced in September that would addresses problems with the SEC proposals. Also on Tuesday, staff from the NWC delivered a petition with more than 100,000 signatures calle on the agency to reconsider the proposed changes” to the SEC whistleblower program.
In the meantime, the topic is starting to get some attention.
Wall Street’s top watchdog loves to tout the success and importance of its whistleblower program.
“These awards show how critically important whistleblowers can be to the agency’s investigation and ability to bring a case to successful and efficient resolution,” said Jane Norberg, who heads the Securities and Exchange Commission’s (SEC) program, when announcing a $50 million reward for two whistleblowers in March.
Norberg’s office is seen as one of the US government’s most successful whistleblower initiatives. It has brought more than $1.7 billion in fines and reimbursements since it started in 2011, helping the agency tackle crimes that threaten the financial system’s stability. So, it’s curious that the SEC is proposing changes to the program that whistleblower advocates say will deter potential tipsters from coming forward with information.
Financial Advisor magazine uses the schedule change to offer an update, quoting Kohn.
The cancellation comes amidst steep opposition to the proposed rule changes, which whistle-blower attorneys and other critics say would diminish the likelihood that whistle-blowers would report financial malfeasance and fraud…
Kohn said the SEC’s proposed 10% cap on large whistle-blower rewards above $30 million “will discourage potential whistle-blowers in many of the largest or most important financial fraud cases. The cap would send the wrong message to both fraudsters and employees contemplating taking the risk of blowing the whistle on major corporate and financial fraud.”
Critics also take issue with the proposed rule’s narrowing of who is entitled to an award. For instance, a whistle-blower who provides original information about a securities violation to anyone at the SEC without first having filed a formal reward claim with the SEC on the proper form would be automatically ineligible for an award in the proposed rule.