On October 5, Representative Al Green (D-TX) introduced the Whistleblower Protection Reform Act of 2021. The bill strengthens the SEC Whistleblower Program through a number of different reforms. On October 21, a collection of whistleblower advocacy groups sent a letter to Representative Green expressing their support for the legislation.
The letter, which was signed by 19 advocacy groups, states that the bill would “strengthen protections for SEC whistleblowers and fortify the SEC’s whistleblower reward program.” Signees of the letter are Accountability Lab, Acorn 8, American-Arab Anti-Discrimination Committee, Defending Rights and Dissent, Essential Information, Government Accountability Project, Government Information Watch, National Whistleblower Center, Open The Government, Project on Government Oversight, Public Citizen, Public Employees for Environmental Responsibility, Shadow World Investigations, Taxpayers Against Fraud, Taxpayers Protection Alliance, Transparency International U.S. Office, Union of Concerned Scientists, Whistleblowers of America, and Zuckerman Law Firm, LLC.
Major reforms in the bill include provisions to strengthen anti-retaliation protections for corporate whistleblowers by closing a number of loopholes that currently exist in the Dodd-Frank Act (DFA). Most notably, the bill extends protections to whistleblowers who make their disclosures internally and not the SEC. In 2018, the Supreme Court held in Digital Realty Trust, Inc. v. Somers that, due to a drafting error in the legislation, the whistleblower protections of the DFA only apply to whistleblowers who directly contact the SEC.
The whistleblower groups’ letter explains that “[w]histleblowers must be protected when they make internal disclosures, or they will be discouraged from sounding the alarm in the first place.” It notes that a vast majority of corporate whistleblowers first report internally.
“Internal reporting benefits companies and their shareholders by alerting them early of potential fraud and offering an opportunity to take corrective action before investors are harmed or providing a chance to halt a fraud scheme,” the letter further states. “Moreover, failing to protect internal whistleblowing would undermine corporate compliance programs by encouraging whistleblowers to report directly to the SEC.”
The Whistleblower Protection Reform Act closes a number of other loopholes in the anti-retaliation provisions of the DFA. These include the lack of “anti-gag” provisions to override Nondisclosure Agreements that often are job prerequisites and the absence of a fair burden of proof, which enables arbitrary rulings.
In addition to strengthening anti-retaliation protections for corporate whistleblowers, the bill includes a number of provisions to fortify the SEC’s whistleblower reward program. The bill requires the timely processing of whistleblower award applications and prevents arbitrary reductions of whistleblower awards. The bill also authorizes the payment of awards to whistleblowers based on recoveries by a bankruptcy trustee in a proceeding stemming from original information provided by a whistleblower.
Overall, the SEC Whistleblower Program has been highly successful. SEC officials consistently praise the program for the key role it plays in the agency’s enforcement efforts and through the program the SEC has awarded over $1 billion to whistleblowers.
Whistleblower advocates see the fixes offered in the Whistleblower Protection Reform Act as essential to the continued success of the SEC Whistleblower Program. The groups’ letter states that they hope “Congress will swiftly enact” the bill.
Read:
