Whistleblower advocates argue 'related action' rule has 'chilling effect' on SEC whistleblowers
Whistleblower lawyers from Kohn, Kohn & Colapinto and the National Whistleblower Center have submitted comments for a proposed rule change to the SEC Whistleblower Program. The final vote on the rules is set for September 2021.
The comments address several alarming amendments passed in September 2020 that could be harmful to the highly successful Whistleblower Program, which has issued almost USD1 billion in awards to whistleblowers since 2012.
The “related action” rule amendment was the focus of the letter. This rule change directly impacts the amount SEC whistleblowers can receive in awards. In some cases, it creates a chilling effect by using ineffective reward laws to deny payouts under the Dodd Frank Act.
Because the "related action" rule permits the Commission to deny paying awards in proceedings where the whistleblower earns an award from another agency, the whistleblower lawyers argue it undermines the Dodd Frank Act.
On 2 August, 2021, SEC Chair Gary Gensler released a statement regarding the possibility of the Commission revising the proposed rules.
“In September 2020, the Commission adopted amendments to the SEC’s whistleblower program rules,” Gensler says in the statement. “Various members of the whistleblower community, as well as Commissioners Lee and Crenshaw, have expressed concern that two of these amendments could discourage whistleblowers from coming forward.
“I have directed the staff to prepare for the Commission’s consideration later this year potential revisions to these two rules that would address the concerns that these recent amendments would discourage whistleblowers from coming forward.”