Sunday Read: Debunking Myths
This summary of efforts to debunk myths about the SEC whistleblower program was sent as part of NWC’s “Sunday Read” series that aims to educate supporters about whistleblower stories and whistleblower legislative or policy initiatives and current events. For more information like this, please join our mailing list.
National Whistleblower Center advocates for and supports Securities and Exchange Commission (“SEC”) whistleblowers and all those who expose and report on any corruption, abuse, or danger that is related to the public sphere. Along those lines, NWC plays a critical role in educating the public, regulators, and whistleblowers about the importance of whistleblower programs and advocate for continued improvements to these programs. But, now, we are called to the defense.
News has been swirling around the Securities and Exchange Commission (“SEC”) through the past weeks, and every change impacts the Commission’s incredibly successful whistleblower program. At National Whistleblower Center, we frequently comment on the workings of the program, and this Sunday we provide some updates about recent news at the Commission.
A major victory for whistleblowers:
Securities and Exchange Commission adopted new rule amendments to the whistleblower program. These amendments were initially proposed in February 2022, and National Whistleblower Center submitted comments which were cited in the final rule publication.
These rules achieve two changes:
· Ensuring that whistleblowers entitled to a mandatory 10–30% award will receive one, even when they cooperate with other agencies.
· Ensuring that awards will not be changed because the award amount will be large.
The rules are consistent with NWC’s comments and although all Commissioners celebrated the value of the program, some Commissioners refused to vote in support of the rules. Their refusals seem largely based on technical concerns and misconceptions about the program, which are rebutted by whistleblower advocates and are discussed below.
Rebutting Attacks on the Whistleblower Program:
A series of articles were published attacking the SEC Whistleblower Program in the past weeks. NWC’s Board Chair, Stephen Kohn, took to the media to rebut these attacks and share the truth with the media.
Mr. Kohn’s articles specifically highlight:
“Wall Street hates whistleblowers and Dodd-Frank. Why? The law holds them accountable.”
“The [SEC] staff is dedicated, they meticulously and carefully protect confidentiality, and we have detected no bias or favoritism whatsoever. We disagree with many of their decisions and have been denied claims. [NWC] vigorously challenging Commission rulings and recommendations. But even where we strongly disagree, the Commissioners, their staffs, and the Office of the Whistleblower have been professional and open to criticism. None of the allegations contained in [this] ‘investigation’ have any merit. Indeed, if these reporters worked with the SEC Whistleblower Office and enforcement staff pursuing difficult and complex investigations triggered by whistleblowers, we are certain that they never would have published their attack.”
NWC agrees with Mr. Kohn’s statements and also supports his explanation of the program here.
“From the perspective of a cost-benefit analysis, it is hard to imagine any other government program that has such a high rate of return. This does not include other major benefits obtained by the program, such as long-term savings based on the deterrent effect of successful prosecutions (and the fear of being detected by a whistleblower), increased compliance requirements (often required as part of a deferred prosecution agreement), and the primary goal of all criminal laws: holding wrongdoers accountable.
Generally speaking, taxpayers bear the burden of paying for the operation of most government programs. But taxpayers pay nothing under Dodd-Frank. Instead, they reap the vast majority of the benefits derived from the program. To qualify for a reward Dodd-Frank whistleblowers must act on a purely voluntary basis. They cannot receive any up-front consideration or payments in exchange for their information. The risk of coming forward is 100% on their shoulders. Under Dodd-Frank, if a whistleblower is not fully voluntary, they are not eligible for a reward. There are no up-front taxpayer costs.”
Taxpayers Against Fraud Educates Congress:
In response to misinformation about the SEC program, Taxpayers Against Fraud (“TAF”), sent a letter to Congress explaining the merit of the program. National Whistleblower Center celebrates TAFs efforts to clear up misconceptions, particularly TAF’s announcement states:
“There’s no question that without a strong whistleblower program at the SEC, billions of dollars in financial fraud would go undiscovered every year. . . Since the law’s inception, the fraud lobby has sought to undermine, weaken, and discredit the whistleblower program. These attacks on the taxpayer must be countered and the record must be corrected.”
The memo sent to Congress stated:
“TAF is not aware of a single member-attorney who believes that the SEC grants awards based on attorney resumes rather than the merits of a whistleblower claim. Multiple TAF member-attorneys with no SEC work experience are responsible for dozens of awards totaling hundreds of millions of dollars — including several of the ten largest awards ever granted.”
“Simply put, the SEC Whistleblower Program effectively exposes massive fraud schemes and deters future fraud, all while providing the necessary assurances and protections to would-be whistleblowers.”
NWC wholeheartedly agrees with TAF’s statements and commends the organization for taking steps to clarify and defend the SEC program.
Support NWC’s Continued Engagement:
NWC comments extensively on SEC whistleblower program and works with whistleblowers to help them better understand how to interact with the program and other whistleblower protection programs. Siri Nelson, NWC’s Executive Director, commented at the Wall Street Journal that attacks and allegations about the program were “preposterous” and NWC will continue to support rebuttals and refute attacks on the SEC or any other effective whistleblower program.
NWC’s fight to protect whistleblowers and the programs they work with is made possible by your generous support. Please donate today to help us continue the fight for whistleblowers and whistleblower programs.