SEC to vote on changes to whistleblower law
The US Securities and Exchange Commission (SEC) is neeting on Wednesday 23 October to vote on proposed changes to the SEC's highly successful Dodd-Frank Act whistleblower reward program.
If approved, the proposed changes will destroy vital whistleblower protections, undermine the whistleblower reward law, and place investors at significant risk to be harmed by increased frauds, 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. Over the past week, whistleblower attorneys from the firm have met with members of the Commission and their staffs. Joining the KKC attorneys at 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 met directly with Commissioners Robert J Jackson, Jr, Allison Herren Lee, and Hester M Peirce, and with the staffs from Chairman Jay Clayton and Commissioner Elad L. Roisman on October 9-10, 2019 to discuss the proposed changes.
"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," says Kohn. "We are particularly concerned over two proposed rules. The first would disqualify numerous whistleblowers who contact the Commission with highly valuable information on securities frauds. The second would disincentivize highly placed executives from blowing the whistle on major frauds by reducing the amount of compensation in large fraud cases.
"It is not surprising that Wall Street strongly supports the radical re-writing of the Dodd-Frank Act. Since the law was passed, Wall Street has heavily lobbied to strip the SEC whistleblower law of its most vital components," Kohn adds.
The success of the current program is highlighted in the 2018 SEC Whistleblower Office's Annual Report. Since 2011, the SEC has recovered over USD1.7 billion in sanctions from fraudsters in whistleblower cases and paid the whistleblowers over USD325 million in awards.
The importance of incentivising whistleblowers was affirmed by the former Chairman of the Commission, Mary Jo White, in Remarks at the Securities Enforcement Forum:
"[Whistleblower rewards] persuade people to step forward. They put fraudulent conduct on our radar that we may not have found ourselves, or as quickly. And they deter wrongdoing by making would-be violators ask themselves – who else is watching me? The program also incentivises companies to report misconduct before a whistleblower comes to us first.
"We believe this program is already a success. And, as more awards are made, we expect more people to come forward, which will dramatically broaden our presence."
“Kohn says: “If approved, the proposed rules will undermine the most successful program protecting investors from frauds. We hope the new Commissioners, appointed by President Trump, will reject every pending proposal that will undermine the program."