In many ways, the SEC Whistleblower Program is the gold standard for whistleblower award programs worldwide. But even a program as successful as it has been is not without its flaws. Most notably, a devastating 2018 Supreme Court ruling stripped the program’s anti-retaliation protections from covering internal whistleblowers. The bipartisan SEC Whistleblower Reform Act would reverse the consequences of this ruling and make other small reforms to further strengthen the SEC Whistleblower Program.
The SEC Whistleblower Program’s mandatory whistleblower awards and strong anti-retaliation protections have proven to be immensely successful in incentivizing whistleblowers with high-quality information about fraud and misconduct to come forward and cooperate with U.S. authorities. Since it was established in 2010, the program has recovered over $6.3 billion in sanctions from fraudsters, allowing over $1.5 billion to be returned to harmed investors.
In 2018, however, the Supreme Court severely weakened the program and put countless whistleblowers at risk of retaliation in its ruling in Digital Realty Trust v. Somers. The Court ruled that the SEC’s anti-retaliation protections do not apply to whistleblowers who report to internal compliance programs and not directly to the SEC. This has been immensely consequential since a majority of whistleblowers first go to internal reporting channels.
The bipartisan SEC Whistleblower Reform Act reinstitutes anti-retaliation protections for internal whistleblowers. It also further strengthens the program by addressing the long delays that have bogged down the program and making sure that nondisclosure agreements do not silence whistleblowers.
Former SEC Commissioner Allison Herren Lee, who now serves as Of Counsel at the whistleblower defense firm Kohn, Kohn & Colapinto, wrote an article calling for the passage of the bill.
The SEC Whistleblower Reform Act reflects a bipartisan consensus that a strong whistleblower program benefits investors, companies and the public. The program has helped uncover — and remediate –serious and costly frauds that might never have otherwise come to light. Having worked in law enforcement for over a decade, and then as an SEC Commissioner helping to oversee the SEC’s Office of the Whistleblower, I know firsthand the value of continued investment in this highly successful program. I hope Congress will act quickly to pass this important legislation.”
Further Reading
- The Bipartisan SEC Whistleblower Reform Bill: Building on Success
- Bipartisan Bill Bolsters Highly Successful SEC Whistleblower Program
- Senators Introduce Bipartisan Bill to Strengthen SEC Whistleblower Program
- Digital Realty’s Victory Is A Loss For Corporate Compliance
- Stay Up-to-Date on the Bill at Whistleblower Network News
