On June 29, 2018 the U.S. Securities and Exchange Commission (SEC) announced proposed amendments that undermine the rules governing its successful whistleblower program.
National Whistleblower Center (NWC) has issued an action alert urging commentary on these proposed amendments. The SEC proposal puts caps on rewards related to cases resulting in $100 million or more in fines. This removes the incentive to blow the whistle on large corporations committing fraud, and consequently will allow large corporate fraud to go unreported and unpunished.
The whistleblower community has been highly critical of the proposed amendments. SEC Commissioners Stein and Jackson have also joined the public opposition to the amendments. Upholding whistleblower protections and incentives is key to producing numerous and high-quality reports of fraudulent behavior—these amendments endanger this check on corporate power.
“At the end of the day, an effective anti-corruption program can work only if telling the truth and reporting frauds is more profitable then committing the crimes. The proposed rule ignores this reality. It disincentives the most important potential whistleblowers in the securities industry and takes away the Commission’s best advertisement for promoting honesty in the markets,” explained NWC executive director Stephen M. Kohn in an Op-ed published by Law360.
The SEC is still seeking public comments on the proposals. It is critical that the public urge the SEC to withdraw these proposed amendments and uphold their Congressional commitment to protect whistleblowers. Action must be taken to protect this powerful tool for fraud prevention, reporting, and prosecution.