A recently introduced House bill has the potential to seriously undermine the effectiveness of the Security & Exchange Commission’s new whistleblower program, according to attorneys at Phillips & Cohen LLP, a law firm that has represented whistleblowers for nearly 25 years.
According to the firm’s Erika A. Kelton, the Whistleblower Improvement Act would actually discourage whistleblowers because it requires them to report violations to their employer, often the party committing the violation, before going to the SEC.
Eric R. Havian, a San Francisco attorney with Phillips & Cohen believes the current regulations strike the right balance. “To encourage internal reporting, the SEC will give a whistleblower a larger reward if the whistleblower reports the violations to the company’s internal compliance program before going to the SEC. But the SEC wisely leaves the decision about internal reporting to the whistleblower, who would know better than anyone whether he or she would suffer retaliation.”
The proposed legislation would also eliminate the requirement for a mandatory award and the mandatory minimum award to 10 percent.
The SEC whistleblower program, created in 2010 by Dodd-Frank has resulted in an increase in high-value fraud tips from two dozen a year to one or two a day.