The SEC’s recent approval of changes to its whistleblower program will weaken the program and deprive the agency of valuable information, according to Better Markets. Many supporters of the program, including Sen. Sherrod Brown, agree.
More than two years after proposing them, the SEC has approved amendments that it claims will provide greater clarity to whistleblowers and increase the program’s efficiency and transparency. However, Better Markets objected, pointing out in a comment letter that the SEC’s actions are contrary to Congress’s express intent and will negatively impact the program that has been successful since Dodd-Frank Act created it nearly 10 years ago.
The Trump administration’s SEC—in a partisan vote and contrary to the language and intent of the Dodd-Frank Act—approved harmful changes to its whistleblower program, which has been a $2 billion success story—as we detailed in this report. Yet, the SEC is weakening the program, which will deprive it of valuable information while causing needless harm to investors. By giving itself undue discretion—not permitted by law—and otherwise imposing additional conditions on rewards, the commission would disqualify meritorious submissions, and potential whistleblowers may be deterred from providing information on suspected fraud and illegal activities.
Because whistleblowers often risk their careers to expose fraud and illegality that is hard to detect, we fear that the changes send a chilling message to all potential whistleblowers: if you provide original information—often risking careers and so much more—your award may be arbitrarily reduced to conform to the ideological whims of the Commission or its staff.
Prior to the SEC’s action, several legislators, including Sen. Sherrod Brown, Sen. Elizabeth Warren and Sen. Jack Reed, sent a letter to SEC Chair Jay Clayton urging the agency to strengthen whistleblower protections as a tool for addressing fraud and misconduct in the financial services industry. They raised some of the same concerns that Better Markets highlighted in its report on the whistleblower program released earlier this year.
Following the SEC’s action, Sen. Sherrod Brown said in a statement that the rule changes “create uncertainty and ambiguity in the evaluation of whistleblower tips and will ultimately make it harder for potential whistleblowers to come forward. At a time when Congress is pushing to strengthen whistleblower protections, the SEC is hurting its own very successful program.” We couldn’t agree more. Read more in Better Markets’ statement.