Lawyer Sues SEC Over New Whistleblower Rules

In an article published in ThinkAdvisor, Whistleblower Practice Chair Jordan A. Thomas’ role as a “principal architect of the SEC Whistleblower Program,” the origin of his lawsuit against the SEC on behalf of his clients, and the impact of the disputed rule changes on the next Chairman of the SEC are discussed.

Under the Dodd-Frank Act, the Commission is required to pay eligible whistleblowers 10 to 30 percent of the monetary sanctions collected. The article recounts how the Commission paid whistleblower award under its original program rules and how the agency proposed amending those rules because they “were leading to whistleblower awards that were too large in situations where the SEC collected significant monetary sanctions.” In September 2020, in a 3-2 vote, the Commission adopted the proposed rules.

Jordan’s lawsuit alleges that the amendments were “for the express purpose of decreasing the size and number awards it issues.” In reliance on the original rules, his lawsuit states, “courageous whistleblowers have put their careers and lives on the line to assist the Commission—including wearing FBI wires, testifying in high-profile trials, and smuggling key documents out of foreign countries. Now, in the proverbial football game, the Commission has moved the goal posts on literally hundreds of SEC whistleblowers.”

When asked about the likely nomination of former CFTC Chairman Gary Gensler to be the SEC Chairman, Jordan said, “Gary Gensler made his name aggressively pursuing Wall Street. However, with Clayton’s parting gift, he’s going to find it harder this time because fewer whistleblowers are going to be willing to participate in the Wall Street program.” He noted that Gensler could “propose a new rulemaking to fix the problem. It is my hope that they will, but my clients can’t afford to wait for something like that to happen.”