Opinion: Changes to SEC whistleblower rules would “destroy the program”

10/21 update: On Monday, the U.S. Securities and Exchange Commission announced it is rescheduling Wednesday’s meeting on proposed changes to its whistleblower program. According to the SEC’s open meeting website, the meeting, previously scheduled for October 23rd, is “cancelled.”

Stephen M. Kohn, chair of the NWC 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.”


The Associated Press is out with a story on upcoming changes to the Securities and Exchange Commission (SEC) whistleblower program.

A federal agency is moving with little fanfare to revamp one of the most successful whistleblower programs in the government, alarming advocates who warn the changes will set back efforts to police Wall Street and punish corporate fraud.

Stephen M. Kohn, chair of the NWC board, told AP that the changes would “destroy the program.”

The proposal would add additional reporting requirements and allow the SEC to cap some awards.The U.S. Chamber of Commerce told AP that the proposal is a small but important step toward stemming “large number of low-quality complaints advanced by … bounty seekers more concerned with enriching themselves than truly protecting investors.”

The NWC has been monitoring these proposals and filed the first of several comments on the changes in December. At that time, the organization submitted the results of research it had conducted on SEC awards, which included a look at how many cases are rejected.

This data includes all laws enforced by the SEC which include a whistleblower reward mandate. An approximate six-year span between 2012
to 2018 includes 131 distinct prosecutions with documented and publicly-available whistleblower award proceedings. Of these cases,
45 resulted in whistleblower awards… In contrast, during this same time period there were 86 cases in which a whistleblower petition for award resulted in the complete denial of any award to a whistleblower. Note that additionally, 32 individual claimants were denied while other whistleblowers in the same case were given awards. The courts and the SEC are clearly looking carefully at whistleblower petitions and ensuring that only the most deserving are granted a reward.

The NWC argues that the caps render whistleblower programs ineffective. From the NWC website. 

The NWC provided the SEC with analysis which demonstrates that reward laws with caps have universally failed. This is shown through an in-depth analysis of the FIERRA and FCA whistleblower provisions, and the efficacy of those laws over three decades. In fact, government agencies which administer the whistleblower reward programs recognize the essential contribution of whistleblowers and oppose reward caps as ineffective. The SEC rejected the cap proposal in 2011 and no commissioner dissented from that rejection, and the NWC urges the SEC to continue to reject the Chamber’s anti-whistleblower, and anti-data, position.


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