After postponing a vote two times already this month, the Securities and Exchange Commission plans to vote Wednesday on controversial changes to its whistleblower rules.
Stephen Kohn, partner at Kohn, Kohn & Colapinto, wrote recently the SEC’s planned changes are “radical,” and “could restructure the Dodd-Frank Act’s highly successful corporate whistleblower law. If implemented as originally proposed, these changes would destroy America’s most successful Wall Street whistleblower law.”
The SEC on Monday announced that it issued a $2.4 whistleblower award to an individual whose reporting led to an investigation that stopped ongoing fraud and misconduct.
On Wednesday, the agency said that it would consider amendments that would enhance claim processing efficiency, and clarify and bring greater transparency to the framework used by the commission in exercising its discretion in determining award amounts, as well as otherwise address specific issues that have developed during the whistleblower program’s 10-year history.
The commission will also consider whether to adopt interpretive guidance concerning the term “independent analysis” in the commission’s rules implementing its whistleblower program.
The most radical of the SEC proposals, Kohn wrote, “is a rule that would restrict otherwise fully qualified whistleblowers from eligibility to collect a reward, regardless of the quality of information provided or the hardships they faced after reporting large corporate crimes.”
Under the SEC’s plan, he continued, “in order for a whistleblower to qualify for a reward they must first communicate their allegations of fraud on a specific form available on the website of the SEC’s Office of the Whistleblower. Failure to use the specific form when first reporting a fraud would result in automatic disqualification from the Dodd-Frank Act’s reward program.
“In other words, any employee who initially reports securities frauds to any office or employee of the SEC, without first filling out a specific form (known as a Form TCR) located on the commission’s website, automatically loses all of his or her rights to receive the mandatory rewards set forth in the law.”
Since 2012, the SEC program has issued over $520 million to 97 whistleblowers.