In a post for New York University Law School’s Compliance and Enforcement blog, Phillips & Cohen partner Sean McKessy lays out his thoughts on the SEC’s proposed changes to its whistleblower program. McKessy – the former Chief of the Office of the Whistleblower – examines how proposed rules might negatively impact whistleblowers and the efficacy of the program.
… it makes no sense for the SEC to adopt certain proposed rules that would inject into the program uncertainty for whistleblowers and discourage those with detailed knowledge of massive fraud from stepping forward. Yet that’s what the SEC is considering doing by arbitrarily cutting awards for the most valuable whistleblowers to less than what they should be entitled to under the statute and current rules.
Rewards are a major reason for the SEC whistleblower program’s success … Under the Dodd-Frank Act, which Congress enacted in 2010, the SEC is required to award whistleblowers 10 percent to 30 percent of the monetary sanctions imposed as a result of the whistleblower’s assistance.
While not saying so explicitly, the proposed rule uses $30 million as a floor for gold-star whistleblower awards. The message for them is that 10 percent of the monetary sanctions should be enough when that amount is over $30 million, no matter how valuable those whistleblowers’ information and assistance were.