SEC to Review Controversial Whistleblower Rule Changes

In a sign that the SEC has started to hear the chorus of concerns about two rules amendments enacted late last year that disincentivize would-be whistleblowers, the Commission announced on August 2, 2021 its intent to potentially revise them.

As reported by Al Barbarino on Law360.com, SEC Chairman Gary Gensler released a statement that he had directed agency staff to prepare revisions for consideration later in the year. Mr. Gensler noted that multiple Commissioners and “various members of the whistleblower community” had raised concerns. One such member, of course, is our own Jordan Thomas, who filed a federal lawsuit to challenge the amendments shortly after they went into effect.

The amendments limit the avenues for potential whistleblower awards by restricting awards based on certain related actions by other law enforcement or regulatory bodies, and otherwise create uncertainty about how much awards may be by giving the SEC discretion to reduce them when it deems that a statutorily calculated award would be too much. This discourages potential whistleblowers from coming forward, as they cannot gauge whether awards would adequately compensate them for the risks they take.

The article mentions the lawsuit filed by Jordan and quotes him as follows: “We only addressed two issues, and those are the two issues [Gensler] has highlighted and intends to fix. I’m not surprised because they are broken, and it’s either they can fix it themselves or have a court fix them.” Jordan also noted that the lawsuit he filed would continue until the SEC fully reversed course and agreed not to enforce the amendments.