Today the U.S. Securities and Exchange Commission (SEC) issued its final rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. By a vote of 3-2, the SEC approved these final rules this morning. The SEC has released a fact sheet summarizing the new rules.
The outcome is a major victory for whistleblowers. The SEC rejected proposals put forward by corporate attorneys asking that whistleblowers be barred from rewards unless they made their first disclosures about the violations to company officials. The SEC rules also protect whistleblowers from retaliation no matter whether they made their disclosures internally or externally.
The National Whistleblowers Center (NWC) has led a public advocacy campaign for months to urge the SEC to reject the industry proposals to gut Dodd-Frank. When the SEC's proposed rules were first published, the NWC issued an emergency Action Alert to mobilize opposition to what could have been the gutting of a landmark whistleblower protection act. Numerous citizens and organizations pounded the SEC with demands that they protect whistleblowers. The result is evident in today's final rule. The SEC cited NWC comments 44 times -- more than it cited to the comments of any other group.
In response, each of the Commissioners opened their doors to personally meet with the NWC staff attorneys and supporting experts we invited. The NWC also filed nine extensive formal comments refuting the Chamber of Commerce's misinformation and explaining how many of the proposed rules undermined whistleblower protection. The Commission listened.
Stephen M. Kohn, Executive Director of NWC, said, "The SEC refused to buckle under tremendous pressure from Wall Street lobbyists (led by the Chamber of Commerce) who worked overtime trying to undermine historic corporate whistleblower protections contained in the Dodd-Frank Act." Mr. Kohn's full statement today follows in the continuation of this blog entry.
Stephen M. Kohn, Executive Director of the National Whistleblowers Center (NWC), issued the following statement:
Central among the Chamber's demands were its insistence that the SEC place strict prohibitions on the right of employees to directly contact the SEC and law enforcement when they witness serious corporate fraud. The National Whistleblowers Center, along with thousands of citizens and numerous other public interest groups, strongly opposed these efforts. The SEC heard our voices. The Chamber's central demand was rejected.
The SEC also adopted a path-breaking proposal suggested by the NWC. Instead of restricting an employee's right to blow the whistle, the SEC has given employees a choice. Employees can either contact the government or work with their internal compliance programs (or do both). Employees who contact their internal compliance programs will be eligible for rewards if those contacts result in successful enforcement efforts by the SEC. In other words, employees can be rewarded if they report fraud internally or if they can contact the SEC directly. This rule makes perfect common sense.
The Dodd-Frank Act was designed to encourage employees to report fraud. The law, if properly administered by the SEC's Whistleblower Office, will result in the detection of multi-million dollar frauds and will create the enforcement hammer needed to make real change in the culture of corruption that fostered fraudsters like Bernie Madoff and led to countless Wall Street debacles, costing innocent investors trillions of dollars.