Senators Warn SEC Against 'Detrimental' Whistleblower Changes

The senators reminded Clayton that during his Dec. 10, 2019, testimony before the Senate Banking Committee, “when asked to commit that the final whistleblower rule will be consistent with the statute and not create a cap, you assured the Committee that, ‘[a]bsolutely, and any characterization of our proposal as a cap is completely misguided.’”

The commission “must preserve the whistleblower program’s incentives and structure to ensure that it remains effective as a means to uncover fraud and misconduct,” the senators wrote. “As you know, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the SEC’s whistleblower program to expose securities law violations and identify risks to prevent another financial crisis.”

The SEC’s plan, the senators continued, would also “permit the SEC to create an insurmountable hurdle for a whistleblower to establish original information based on ‘independent analysis.’”

They continued: “Even the Commission itself concedes that its Proposal creates uncertainty in stating that, ‘[w]hile we recognize that this standard does not constitute a bright line, we believe that it should provide a solid foundation for the Commission to apply when assessing awards.’ The Commission’s proposed approach has it backward — an individual that could report otherwise unknown violations needs a bright line in order to come forward at great personal risk.”