SEC Whistleblower RewardsOn Wednesday, December 12, 2018, National Whistleblower Center (NWC) Executive Director Stephen M. Kohn made a formal presentation to representatives from the U.S. Securities and Exchange Commission (“SEC”) opposing the proposed SEC rule  limiting awards in major fraud cases.  Kohn was joined by NWC Policy Counsel Maya Efrati and NWC Legal Fellow Sarah Khan. The packed room included SEC leadership from the Office of General Counsel, the SEC Whistleblower Office and the Office of the Chairman of the Commission. The meeting lasted for over one hour.

Prior to the meeting a major grass roots initiative urged Commission representatives to meet with the whistleblower qui tam lawyers from the NWC, who are internationally recognized experts on qui tam whistleblower award laws.  For example, in the past two months Kohn made a major presentation on the use of whistleblower reward laws at an international anti-money laundering conference in London, he provided testimony to the European Parliament on whistleblower qui tam and reward laws, and he delivered the keynote address at the International Annual Conference on Integrity, held in Lima, Peru and attended by approximately 2000 auditors and anti-corruption government officials from throughout South and Latin America.

Here in the United States, the SEC received over 3,490 letters directly from the NWC’s Action Alert Network members urging the SEC to reject the proposed whistleblower rewards cap and urging the Commissioners to meet directly with the NWC experts.

At the meeting the NWC delivered two comprehensive reports on the importance of the SEC program, and the destructive impact the proposed rule would have on the program.  Mr. Kohn also proposed a “compromise” solution to some of the issues identified in the Proposed Rule.  Kohn urged the Commission to reject any form of “cap,” and explained how whistleblower reward programs that instituted a “cap” all failed.  He also explained how highly compensated Wall Street employees would not risk their careers if they believed the SEC may limit their rewards.

Kohn also explained how the SEC lacked the statutory authority to limit rewards based on the amount of funds available to pay rewards in the Investor Protection Fund.  However, he explained that the SEC did have the authority to stagger the payout of larger awards over time, if the Protection Fund lacked assets.   After the meeting a formal proposal was submitted to the SEC staff and placed on the public record.  The two NWC reports were also placed on the public record.

After the meeting Kohn, who represents leading qui tam and corporate whistleblowers from around the world, including, Mr. Howard Wilkinson (who exposed the largest money laundering scheme in history –  $230 billion), stated:  “The SEC responded to the letters of support from the NWC’s action alert program, and agreed to meet with us and discuss the proposed rules.  The staff listened carefully, and we hope will ensure that the SEC’s program is enhanced by any finalized reforms, not destroyed.”

Read NWC’s reports given to the SEC here:

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  • Dom LaViola

    A compromise? Funny everyone is focused on caps, when the proposed rules seek to render any number of the currently award eligible claims under the existing rules, ineligible under the new rules and wrongful re-definitions the SEC proposed to apply to all pending claims, of the roughly 900+ claims the SEC has been hoarding, without issuing decisions on, for years!

    Is THIS what you compromised on?

    Now if the above was not egregious enough how about the summary disposition process designed to deny more claims faster! Did you compromise on that too? or the revocation of a claimants right to review the evidence used in forming the denials, while cutting in half the time to submit a reconsideration request or lose the right to appeal altogether?

    SEC states: “We acknowledge the potential that certain aspects of the proposed rule might make it more difficult for whistleblowers to respond to the denial of award applications. ”

    SEC states that the summary disposition process will be applied to : “…In addition, the proposed rule would provide that other defective or non-meritorious award applications could be subject to the summary disposition process under appropriate circumstances. ”

    Its a blank check denial system that prevents appeals from first being filed, and secondly prevents them from being successful,

    See the points you brilliant attorneys are missing are that the SEC in triaging every claim as they are received, based on false beliefs of what the rules are vs what the SEC wants them to retroactively be, has been denying award eligible claims without issuing an official decision and setting them aside to usurp judicial review, while the retroactively applied changes to the program are to be made, in order to stand up on appeal after they are denied en masse. post adoption of the rules.

    There are 900 plus cases undecided, and I’ll bet dollars to donuts that the one thing they all have in common is that none of them are represented by counsel, because not one of you whistleblower experts has shown even a remote interest in protecting their rights or questioned where the heck the award money to pay those undecided cases has gone.

    SEC says it triages every claim and selects the ones that are meritorious and likely to result in awards…how then does it explain the fact that 4 times more claims have resulted in final agency denials than awards?

    …and all you people are worried about is caps? What the hell do caps matter when awards arent paid at all and to a system where the rules can be indiscriminately changed with or without Congressional or even SEC approval, to prevent payment of awards 5 to 10 years after a whistleblower steps forward , during which, his or her life as they knew it was systematically destroyed for having stepped forward in the first place?!

    You’re all insane!