Big Win for Whistleblowers at the SEC

By: WebWire

August 26, 2022 at 23:15 PM EDT

Today the U.S. Securities and Exchange Commission (SEC) adopted two amendments to the rules of its highly successful whistleblower program. The amendments, which were widely supported by whistleblower advocates, allow the agency to better award whistleblowers who voluntarily provide the agency with original information that leads to successful enforcement actions.

“The SEC hit a home run. The investors, the taxpayers, and the public are the biggest winners today,” said whistleblower lawyer Stephen M. Kohn, a partner in the firm of Kohn, Kohn and Colapinto.

“The Commission ensured that whistleblowers who turn in the biggest frauds will not be penalized by having their rewards reduced. As the Commission understood, paying large awards in the biggest fraud cases will have a deterrent effect on Wall Street,” Kohn added.

“The Commission clarified that rewards cannot be reduced in large cases, where the biggest corporate players on Wall Street are caught red-handed by a whistleblower,” Kohn said.

The Commission also amended the “related action” award provisions. This provision incentivizes whistleblowers to provide their information not only to the SEC, but to every other government law enforcement agency that may have an interest in the case.

According to Kohn, who also serves as the Chairman of the Board of Directors of the National Whistleblower Center, “The related action requirements are among the most important features of the Dodd-Frank whistleblower law. These provisions ensure that whistleblowers will be rewarded not only for providing information to the SEC, but also if they cooperate with other law enforcement agencies that are investigating crimes based on the evidence they provide to the SEC. The related action provision ensures that the information provided to the Commission will be exploited to the maximum extent possible to hold accountable or put into jail all of the criminals who are ripping off investors, the taxpayers and the public.”

“I think that these rules will strengthen our whistleblower program,” said SEC Chair Gary Gensler. “That helps protect investors.” Since the SEC Whistleblower Program was established in 2010, it has allowed the agency to recover over $5 billion from fraudsters. Correspondingly, the agency has awarded over $1.3 billion in awards to over 280 whistleblowers.

KKC filed extensive comments in support of these changes, and its proposals were cited 11 times by the SEC. Kohn is available for further comment and to fully explain the impact of these rules, most of which are highly technical in nature.

The new rules are linked here: https://www.sec.gov/rules/final/2022/34-95620.pdf

The SEC Press release is linked here: https://www.sec.gov/news/press-release/2022-151

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