SEC suspends enforcement of some whistleblower program rules

The Securities and Exchange Commission said it would consider revising the two amendments to the Whistleblower Reward Program Rules adopted last September, and tentatively suspended some of the two amendments significantly. Then he added.

Earlier this week, SEC Chairman Gary Gensler said he was instructing staff to prepare. Potential revision of two fixes For what authorities considered later this year to address concerns that whistleblowers would discourage them from coming forward. The two rules were part of a series of amendments approved by the SEC last year. With 3-2 votes, Democrats Alison Helen Lee and Caroline Clenshaw are against it.

The SEC’s whistleblower program was enacted in 2011 as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Under this program, whistleblowers can receive a total of 10% to 30% of the fines imposed in SEC civil enforcement proceedings due to chips, assuming the total fines exceed $ 1 million. ..

According to a statement by Gensler on Monday, one amendment could be used by future committees to lower the award because of its size. Another amendment prevents the SEC from making a ruling in the relevant proceedings filed by other law enforcement agencies and regulators if another whistleblower incentive program may also apply to the proceedings. Probably.

Specifically, should SEC staff revise the rules to allow agents to reward relevant actions that may be covered by alternative whistleblower programs that are incomparable to the SEC program? Gensler said he was considering it.

According to a statement on Monday, SEC staff will also consider making it clear that government agencies will not reduce rewards based on that amount.

The SEC issued a statement on Thursday adopting a new procedure for the interim period while considering possible revisions. The SEC said it would continue to consider dollar amounts only in connection with some of the rules that explicitly allow the use of such discretion to raise rewards.

This means that up to 30% will be automatically applied to rewards estimated to be under $ 5 million, assuming there were no negative factors such as unreasonable delays in reporting potential fraud.

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For “related behavior” rules, during the interim period, the SEC either exempts certain eligible incentives from the amendment restrictions or notifies recipients of the amendments.

The applicant may then request a delay in processing the application after the rules have been enacted, as per the procedural announcement.

In a joint statement Thursday, two Republicans criticized the change in procedure. Hester Peirce and Elad Roisman said the procedural changes effectively invalidated the current SEC rules and were designed to effectively ignore the two rules while the proposed amendments were being developed and considered. I did. They said such actions would reduce the certainty of the law.

“This sequence of actions is unwise and continues to set a nasty and unproductive precedent,” they said in a statement. “If you abandon the rules that have been formally adopted without notice or request for comment, the rules adopted by the Commission in accordance with the Administrative Procedure Act may be provisional at best and, in the worst case, temporary.”

Jordan Thomas, Filed SEC in January The two amendments were filed in federal court in Washington, DC on Friday in collaboration with the SEC to suspend the proceedings in light of the SEC’s agreement to consider changing the rules.

“This is a big event. We expressed concern in January, and within six months, the Commission agreed to change the rules we disputed, and of the two rules. I abandoned the enforcement, “he said. “This is a big win for whistleblowers and a loss for those who have defended Wall Street’s interests.”

Other lawyers representing whistleblowers also welcomed the SEC’s actions.

“The policy statement issued by the SEC on August 5, 2021 is a home run for whistleblowers,” said Stephen M. Korn, chairman of the board of directors of the National Whistleblower Center, in a statement on Friday. “The SEC has done the right thing to protect a very successful program from administrative abuse.”

Write to Mengqi Sun at

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SEC suspends enforcement of some whistleblower program rules

Source link SEC suspends enforcement of some whistleblower program rules

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