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SEC Commissioners Set to Rein in Wall Street Whistleblower Program

The changes will make it harder for whistleblowers to receive legal protection when stepping forward with tips about fraud and wrongdoing on Wall Street.

Three of the five Securities and Exchange Commissioners, two Republicans and one independent, are readying to alter a Wall Street whistleblower program put in place after the 2008 financial crisis, the Associated Press reports. In order to crack down on fraud in the private sector that led to the Great Recession, Democrats in Congress installed the whistleblower program so that people who come forward to the SEC with allegations of wrongdoing on Wall Street are granted anonymity. The program also gives cash payouts—taken directly from funds the SEC collects in settlements—to whistleblowers who provide information that helps the agency identify fraud and wrongdoing. Now, SEC commissioners appointed by President Trump, with the backing of the business community, are pushing to change the program, saying it has slowed economic growth and needlessly restricted lending.

The new rules would make it harder for whistleblowers to receive large payouts when coming forward with information about smaller frauds. The changes would also require whistleblowers to report violations in writing, rather than the oral disclosures now permitted by the SEC, making it harder for them to receive legal protection—and increasing a risk of retaliation from their companies. Critics say that by lowering the chances of a huge payout, and creating hurdles for legal protection, people will be discouraged from coming forward. “It would destroy the program,” said Stephen Kohn, chairman of the National Whistleblower Center. (The changes are) “counter to every whistleblower law, rule and policy.” The changes are expected to be adopted this month, as only a majority vote of commissioners is necessary to approve new rules.