The SEC is reconsidering changes to its whistleblower program after pushback from advocates and lawyers, according to news reports.
The current program, set up after the 2008 financial crisis, doles out awards to whistleblowers of between 10% and 30% of fines exceeding $1 million levied by the SEC as a result of their information, according to Reuters. So far, the program has resulted in more than $2 billion in penalties, including against firms such as JPMorgan and Bank of America, the parent company of Merrill Lynch, and $387 million in whistleblower awards, the newswire writes.
Last year, the regulator proposed giving its staff discretion in determining the size of the awards that would exceed $30 million, according to Reuters. Most of the awards have been under $2 million but some have reached $50 million, the newswire writes. The SEC also proposed forcing whistleblowers to file reward claims within 30 days of initiating contact with the commission, according to Reuters.
But the proposed amendments met with backlash from whistleblower advocates who claim that the changes could lead to reducing incentives for whistleblowers to come forward, people with knowledge of the deliberations told Reuters. Among them was Sean McKessy, who set up the SEC whistleblower office and is now a partner at the law firm Phillips & Cohen, the newswire writes citing SEC Chairman Jay Clayton’s calendars.
“Imposing more agency discretion on its awards only suggests to whistleblowers that the SEC plans to make restrictive an already complicated and risky process,” McKessy tells Reuters.
In addition, Sen. Chuck Grassley, R-Iowa, has called on the SEC to rethink the changes, one of the sources tells the newswire. The senator declined comment to Retuers about his conversations with the SEC but says it was “good news” that the regulator was reconsidering the revamp of the program.
Furthermore, the SEC’s own two Democratic commissioners publicly opposed the changes, the newswire writes.
As a result of the pushback, Clayton postponed a scheduled Oct. 23 vote on the changes, according to Reuters, which cites public documents and its sources.
Instead, Clayton and SEC staff met with whistleblower lawyers and advocates on that day, the newswire writes citing Clayton’s calendars and people who participated in the meetings. On Friday, Clayton issued a statement saying the concerns are “not lost on me,” and added that he hopes the final changes lead to more rather than fewer tips, according to Reuters.