The Securities and Exchange Commission announced two new amendments on February 10. The objective is to bolster its successful whistleblower program further and address some issues raised by rule changes passed in 2020.
The proposals
One proposed amendment allows the SEC to pay rewards for related actions carried out by another government agency’s whistleblower program. This change would enable the SEC to add its rewards to those already paid by the other agency.
The other proposal would allow the SEC to consider the reward amount when considering the potential increase in the dollar amount. However, it eliminates the option to consider the dollar amount if it wants to decrease the amount.
According to SEC Chair Gary Gensler: “The first proposed rule change is designed to ensure that a whistleblower is not disadvantaged by another whistleblower program that would not give them as high an award as the SEC would offer. Under the second proposed rule change, the SEC could only consider the dollar amounts of potential awards to increase the whistleblower’s award. This change would give whistleblowers additional comfort knowing that the SEC could consider the dollar amount of the award only in such cases.”
Another step in the right direction
Whistleblower advocates were highly critical of some proposals first made by the SEC in 2018, which they claimed threatened the program’s efficacy. The unpopular proposals — one was the automatic reduction of large fines, and the other required specific paperwork to be eligible for awards — were subsequently withdrawn. The new proposals further build on that success by ensuring that the SEC complies with the law and pays the rewards it is supposed to.
What the changes mean
The first proposal enables agencies to work together on related enforcement actions rather than one or the other handling the case. It would ensure that the whistleblower does not get paid twice for the same action, but it still helps ensure payment of the full amount. The second enables the SEC to increase the dollar amount of a reward if it believes it is insufficient for the information the whistleblower provided.
