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SEC Seeks Comment on Limiting Whistleblower Awards

July 2, 2018

The SEC is seeking comment on proposed changes to tweak its whistleblower award program, among which is “discretion” on how much the regulator awards on larger sanctions, the SEC says in a press release.

Under the proposal, the SEC would get discretion to limit whistleblower awards on sanctions of $100 million or more, the regulator says. However, awards would not be adjusted below $30 million under the proposed changes, and would still be subject to the current 10% minimum, the regulator says. The SEC is also seeking discretion to adjust the awards upwards, in some circumstances, subject to the 30% statutory maximum, according to the press release.

More than 60% of the awards in the program have so far been under $2 million, according to the SEC. But 40% of the whistleblower awards have been paid out in just three awards, the regulator says.

By law, the SEC’s Investor Protection Fund must be replenished whenever it falls below $300 million, with funds from monetary sanctions not paid to the victims of the violations, according to the press release. Those funds, the SEC says, could otherwise “be made available for use in funding other valuable public programs.”

The SEC is also seeking to eliminate potential double recovery for the same information provided by a whistleblower under different whistleblower programs, the regulator says.

Other proposed changes include a uniform definition of “whistleblower” and boosting efficiency in the award process by clarifying the SEC’s ability to bar whistleblower awards when the information submitted is false, isn’t provided as required, or isn’t used by the SEC’s staff in their investigations, according to the press release. The regulator is also proposing several clarifications to policies and procedures having to do with documentation.

The SEC says that the proposed changes are intended to ensure that whistleblowers are properly compensated while increasing the efficiency of the whistleblower claim review process, as well as to clarify anti-retaliation protection requirements.

The public comment period on the proposed changes will last 60 days from the day they’re published in the Federal Register, according to the press release.

By Alex Padalka