On Friday, the SEC announced that it had adopted two amendments to the rules governing its whistleblower program. This excerpt from the SEC’s press release summarizes the changes:
Specifically, the SEC amended Rule 21F-3 to allow the Commission to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity’s whistleblower program. The amendments allow for such awards when the other entity’s program is not comparable to the Commission’s own program or if the maximum award that the Commission could pay on the related action would not exceed $5 million.
Further, the amendments affirm the Commission’s authority under Rule 21F-6 to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and it would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.
The amendments prompted much rejoicing from the whistleblower bar, but left the two dissenting Republican commissioners scratching their heads about why the SEC felt the need to do this. Frankly, I find myself doing the same. Here’s an excerpt from Commissioner Mark Uyeda’s dissenting statement, which picks up on some recent criticism concerning the program’s lack of transparency:
High-quality tips from whistleblowers represent an important tool in the Commission’s enforcement program. To the extent that the Commission seeks to improve the Whistleblower Program and its rules, it should perhaps consider promoting greater visibility into its claims and award determinations, and increasing the number of high-quality tips from unrepresented persons. Such a review could also evaluate the role played by lawyers representing whistleblowers on a contingency fee basis and how they present tips to the Commission.