SEC Commission to vote on changes to the Wall Street whistleblower law on 2 September
The US Securities and Exchange Commission (SEC) will meet at 9am on 2 September, 2020 to vote on proposed changes to the SEC's highly successful Dodd-Frank Act whistleblower reward programme.
If approved as originally written, the proposed changes will undermine vital whistleblower protections, and place investors at significant risk of being harmed by increased fraud, according to whistleblower rights law firm of Kohn, Kohn and Colapinto. The firm has taken a leadership role in trying to convince the SEC Commissioners to reject all of the anti-whistleblower proposals.
Since the rules were originally proposed in 2018, whistleblower attorneys from the firm met with members of the Commission and their staffs. Joining the KKC attorneys at some of these meetings were representatives from the National Whistleblower Center and ENRON whistleblower/Time Magazine Person of the Year Sherron Watkins.
KKC partner Stephen M Kohn, who met directly with SEC Chairman Jay Clayton, Commissioners Robert J Jackson, Jr, Allison Herren Lee, and Hester M Peirce, and with the responsible staff persons for Commissioner Elad L Roisman, the Office of General Counsel, and the Office of the Whistleblower to discuss the proposed changes has issued the following statement:
"The Commissioners and their staffs were open to hearing our concerns. We sincerely hope that the Commission does not approve the rules as originally proposed. The changes will cause untold harm to whistleblowers and undermine the current SEC program.
“Instead, we hope that the Commission has acted on the recommendations submitted by my firm, numerous whistleblowers, and numerous advocacy groups for whistleblowers and investors, and will use this opportunity to improve the program.
“Especially in light of the large scale frauds being committed due to Covid-19 issues, the time is right to improve the whistleblower program, not undermine its effectiveness.
"We are particularly concerned over three proposed rules. The first would permit the SEC to reduce the amount of rewards in large cases. The second would eliminate the current authority of the SEC to sanction public companies that retaliate against internal corporate whistleblowers. The third would create a procedural barrier to obtaining an award simply due to communicating fraud concerns to the Commission without using a highly technical form to initially report the violations. This third rule-change could result in numerous otherwise fully qualified whistleblowers losing their right to a reward.”
The success of the Dodd-Frank Act whistleblower program was recently highlighted in a release issued by the SEC Office of the Whistleblower. The Office acknowledged that since 2011, the SEC had already recovered over USD2.5 billion in sanctions from fraudsters based on whistleblower disclosures, provided over USD750 million in restitution to investors, and compensated whistleblowers with over USD500 million in awards.