SEC Proposes to Undermine Whistleblowers
The Securities and Exchange Commission (SEC) issued a proposed rule to reduce the size of whistleblower rewards in cases in which the US recovers $100 million or more. This proposed rule was will discourage high ranking and well-compensated employees at large financial institutions from blowing the whistle.
National Whistleblower Center Executive Director Stephen M. Kohn participated in the drafting of Dodd-Frank Act (DFA), submitted numerous comments during the 2010-11 SEC whistleblower rulemaking proceedings, and individually met with every commissioner during the SEC’s rulemaking process. Mr. Kohn, who is an expert on whistleblower law and has represented whistleblowers for 34 years, issued the following statement:
“Large financial rewards are necessary to encourage high-ranking and highly-compensated corporate executives to blow the whistle on fraud. The risk an employee takes in blowing the whistle and placing their entire career on the line are enormous and the ability to collect a large award is the single most important motivating factor encouraging employees to take this risk. This is especially true with high-level executives who could lose large salaries and face the complete destruction of their careers.
It is these well-placed executives that have the most significant information about large, often transnational, frauds. Every time the SEC gives a large dollar award, executives from around the world are informed about their right to blow the whistle, and their ability to potentially protect themselves from the harm that whistleblowers often face.
The SEC must remain focused on policing the big banks and the large corporate wrongdoers. The SEC’s proposed rule would have the effect of transforming the SEC Whistleblower Program into one that targets low-level employees at smaller businesses with lower quality information to report smaller frauds. The goal must remain to catch the big fish.
Based on our 34 years of experience representing whistleblowers, we look forward to meeting with the Commissioners to fully explain the problems triggered by the proposed rule. We hope the Commissioners will carefully listen to the information provided by the whistleblower community and are not overly swayed by the large corporations and financial institutions that will be the primary beneficiaries of this proposed rule. ”
Founded in 1988, the National Whistleblower Center is a non-profit, non-partisan legal advocacy organization that fights for whistleblower rights in the U.S. and around the world.
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