NWC Objects to Proposed Rules After SEC Admits the Rules Will Result in "Forgone Opportunities for Effective Enforcement"
Washington, D.C. November 22, 2010. Today, the National Whistleblowers Center (NWC) voiced its strong opposition
to Proposed Rules submitted by the Securities and Exchange Commission implementing the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In a letter to the SEC Chairman
released today, the NWC disclosed that buried in its 181-page rule making document, the Commission staff was forced to admit that its rules, if approved, would actually undermine protections for whistleblowers and cause employees to withhold important information about securities violations from the SEC.
The following admissions are contained in the SEC staff's analysis of the Proposed Rules:
* "would limit the pool of eligible whistleblowers and thereby reduce the number of potentially useful informants" Proposed Rule, p. 112;
* "discourage potential whistleblowers from coming forward" by "heightening the standards for eligibility" Proposed Rule, p. 117;
* "discourage some whistleblowers from submitting potentially useful information" Proposed Rule, p. 118;
* "result in instances in which the Commission does not receive important information regarding potential violations" Proposed Rule 118;
* "cause those persons not to come forward with information in their possession about securities law violations." Proposed Rule, p. 118;
* "result in . . . forgone opportunities for effective enforcement action." Proposed Rule, p. 118.
In addition to these substantive impediments, the Commission also acknowledged that its proposed procedures for filing a claim will be "burdensome and confusing" for many whistleblowers. Proposed Rule, p. 116.
"The Commission is cooking the goose that can lay the golden egg. Under their proposal, fraud will go undetected for years and investors will lose untold billions of dollars," said Stephen M. Kohn, Executive Director of the National Whistleblowers Center. "The same Commission that repeatedly failed to investigate whistleblower concerns over Bernie Madoff's Ponzi scheme is now poised to implement rules that will ensure that future Madoff's will go undetected," added Kohn.
The NWC also filed today a detailed Freedom of Information Act request seeking full public disclosure of all corporate lobbying related to the whistleblower provision: "We need to get to the bottom of why the SEC has gutted critical oversight and accountability provisions of Dodd-Frank. The public deserves to know how lobbyists corrupted the process designed to prevent the next financial meltdown," added Lindsey M. Williams, the Director of Advocacy and Development of the NWC.