New reporting by Bloomberg highlights the immense success of the U.S. Securities and Exchange Commission (SEC) Whistleblower Program as well as the issues currently facing the program.
“Interviews with attorneys who participate in the program and a review of SEC decisions — along with court cases challenging some of those decisions — portray a program straining under the weight of its success,” the article states.
In particular, Bloomberg notes that while the SEC Whistleblower Program received a record 18,000 whistleblower tips in Fiscal Year 2023, the number of awards it paid out that year shrunk. Bloomberg suggests that “an increasing number of tips strains the SEC’s ability to investigate them and process awards.”
The article features insights from leading whistleblower attorney and advocate Stephen M. Kohn, founding partner of Kohn, Kohn & Colapinto (KKC) and Chairman of the Board of National Whistleblower Center (NWC).
“This is the most successful anti-corruption program ever established, and when the rules were developed in 2010-11, the way the program has grown was not anticipated,” Kohn told Bloomberg. “So, there are numerous holes that need to be addressed by Congress and the agency’s own rule-making.”
One reform Kohn calls for in the Bloomberg article is ensuring that qualified SEC whistleblowers are rewarded even if the fraudulent company goes bankrupt.
“If the fraud is so big that it sends a company into bankruptcy, that is telling you that these whistleblowers did a tremendous public service,” Kohn said. “How can you decide not to pay whistleblowers when you recover hundreds of millions of dollars?”
Elsewhere, Kohn has advocated for the passage of the bipartisan SEC Whistleblower Reform Act. On March 15, Senators Chuck Grassley (R-IA) and Elizabeth Warren (D-MA) introduced the bill in order to further strengthen the highly successful SEC Whistleblower Program. The bill bolsters the Dodd-Frank Act’s anti-retaliation protections and ensures that the agency processes award claims in a more timely manner.
According to Allison Herren Lee, former SEC Commissioner and currently Of Counsel at KKC, the SEC Whistleblower Reform Act of 2023 “will help ensure that the SEC Whistleblower Program remains an indispensable tool in the Commission’s efforts to police wrongdoing and protect investors.”
National Whistleblower Center (NWC) is calling for the immediate passage of the SEC Whistleblower Reform Act. It has set up Action Alert calling on whistleblower supports to join them in urging Congress to pass the bill and protect internal corporate whistleblowers.