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Regulation and Compliance > Federal Regulation > SEC

SEC Expands Whistleblower Program

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What You Need to Know

  • The changes allow the SEC to pay whistleblower awards for certain actions brought by other entities as well as increasing an award amount.
  • Whistleblower lawyer Stephen Kohn called the amendments “a home run” benefiting investors, taxpayers and the general public.

The Securities and Exchange Commission adopted amendments to its whistleblower rules that allow the agency to pay whistleblowers for information in connection with non-SEC actions as well as affirm the SEC’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award but not to lower an award.

SEC Chairman Gary Gensler said the first change expands “the circumstances in which a whistleblower who assisted in a related action can receive an award from the Commission for that related action rather than from the other agency’s whistleblower program.”

Under the second change, “when the Commission considers the size of the would-be award as grounds to change the award amount, it can do so only to increase the award, and not to decrease it,” Gensler explained.

Specifically, the SEC amended Rule 21F-3 to allow the Commission “to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity’s whistleblower program,” the agency explained.

The amendments, adopted on Aug. 26, “allow for such awards when the other entity’s program is not comparable to the Commission’s own program or if the maximum award that the Commission could pay on the related action would not exceed $5 million,” according to the SEC.

Further, the amendments affirm the Commission’s authority under Rule 21F-6 “to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and it would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award,” the agency said.

The amendments reverse changes made to the agency’s whistleblower rules under its former chairman, Jay Clayton.

‘Home Run’

Whistleblower lawyer Stephen Kohn, a partner at Kohn, Kohn and Colapinto, said in a statement that the SEC “hit a home run” with the changes, with “investors, the taxpayers, and the public” being the biggest winners.

“The Commission ensured that whistleblowers who turn in the biggest frauds will not be penalized by having their rewards reduced,” Kohn added. “As the Commission understood, paying large awards in the biggest fraud cases will have a deterrent effect on Wall Street.”

The SEC also “clarified that rewards cannot be reduced in large cases, where the biggest corporate players on Wall Street are caught red-handed by a whistleblower,” Kohn explained.

The other change amends the “related action” award provisions, which incentivizes “whistleblowers to provide their information not only to the SEC, but to every other government law enforcement agency that may have an interest in the case,” Kohn added.


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