Republican CHOICE Act 2.0 Preserves The SEC Whistleblower
Program

Over the past several months, many people have asked me what I
think, as an
SEC whistleblower lawyer, about the future of the
SEC whistleblower program
in light of the current Presidential administration’s calls to
“repeal” the Dodd-Frank Act.

This question has come up again following U.S. Representative
Jeb Hensarling’s public presentation last week of a
“discussion draft” of an updated version of his Financial
CHOICE Act.  The new version, officially named the
Financial CHOICE Act of 2017, is already being commonly referred to as the Financial
CHOICE Act 2.0.

Representative Hensarling is the Chairman of the U.S. House of
Representatives’ Financial Services Committee.  For my
discussion of his original 2016 Financial CHOICE Act proposal,
click
here.

My Impressions As An SEC Whistleblower Lawyer

Previously, I stated my belief that regardless of whatever
eventually happens to the Dodd-Frank Act, the SEC
whistleblower program is not likely to be repealed.  Certain
provisions of the SEC whistleblower program may be modified,
possibly changing certain requirements or conditions for
receiving an
SEC whistleblower award,
but the program itself is not likely to be eliminated.

That is still my present belief.  It is supported by my
reading of the “discussion draft” of Chairman Hensarling’s
Financial CHOICE Act 2.0.

The Post-Election Timeline

Shortly after the 2016 Presidential election, I wrote a
three-part article
in which I explained how federal whistleblower programs have
historically enjoyed bipartisan support.

In February of this year, I wrote about a
letter
that two Republican U.S. Senate Committee Chairmen sent to the
CFTC urging stronger whistleblower protections.

At the end of March, I analyzed a
bipartisan bill
that was introduced in the U.S. Senate to enhance the civil
penalties available to the U.S. Securities and Exchange
Commission (“SEC”).

One theme of those articles is that the trend in the U.S.
Congress continues to be supportive of
SEC whistleblowers.  The
proposed Financial CHOICE Act 2.0 appears to be consistent
with that theme.

Proposed Act Leaves The SEC Whistleblower Program Almost
Entirely As Is

The draft Financial CHOICE Act 2.0 is approximately 593 pages
long.

I have not read the draft bill line-by-line in its entirety
yet.  But my reading of those sections that are titled as
having to do with the SEC or the SEC whistleblower program
reveal that the Financial CHOICE Act 2.0 would not merely
preserve the SEC whistleblower program.  It would leave it
almost entirely intact, in its original form as found in the
Dodd-Frank Act.

So far as I can tell, Chairman Hensarling’s proposed Financial
CHOICE Act 2.0 would make only a single modification to the
SEC whistleblower program as it currently exists.

SEC Whistleblower Awards For Intentionally Culpable Violators

As I explained
approximately 2½ months ago, under the SEC whistleblower
program as it currently exists, if a person is
criminally convicted of the same fraud that they
report to the SEC, they will be ineligible to receive an SEC
whistleblower award.

In the federal context, criminal cases are brought by the U.S.
Department of Justice and the U.S. Attorneys’ Offices.  The
SEC does not prosecute people criminally. The SEC brings
“civil” actions and imposes “civil” fines and penalties.

As it now stands under the Dodd-Frank Act, if the SEC brings a
case against an otherwise qualified SEC whistleblower, that
person is still eligible to receive an SEC whistleblower
award.  The caveat is that the person’s SEC whistleblower
award determination will be offset by the amount of the fraud
that they were responsible for.

In that
same article, I predicted that the Financial CHOICE Act 2.0 would not
seek to dismantle the SEC whistleblower program, but would
rather attempt to take the already-existing ban on criminal
convicts receiving SEC whistleblower awards, and extend that
ban to those found liable solely in SEC civil actions.

That prediction appears to have been accurate, as this seems
to be the one and only change that the proposed Financial
CHOICE Act 2.0 would make to the SEC whistleblower program. 
(See the discussion draft of the Financial CHOICE Act
of 2017 §§ 828, 857.)

According to the draft bill, a whistleblower, who is found
liable in an SEC civil action for the same conduct or fraud
that he/she reported to the SEC, would no longer be eligible
to receive an
SEC whistleblower reward.

Comfort For An SEC Whistleblower Or SEC Whistleblower Lawyer

For the past year or so, Chairman Hensarling has been one of
the most high-profile and vocal critics in Congress calling
for the “dismantling” of Dodd-Frank.

The recently unveiled draft of his Financial CHOICE Act 2.0
should provide some comfort to an SEC whistleblower or
SEC whistleblower attorney.  Based on the text of the draft, it seems that Chairman
Hensarling recognizes the importance and value of the SEC
whistleblower program, and does not intend to destroy it as
some people may have feared.

* * *

About the Pickholz Law Offices LLC

The Pickholz Law Offices LLC is a law firm that focuses on
representing clients involved with investigations conducted by
the U.S. Securities and Exchange Commission, FINRA, and other
securities regulators.

The Pickholz Law Offices has represented employees, officers,
and others in SEC whistleblower cases involving financial
institutions and public companies listed in the Fortune Top
10, Top 20, Top 50, Top 100, Top 500, and the Forbes Global
2000. We were the first law firm ever to win an SEC
whistleblower award for a client on appeal to the full
Commission in Washington. Inside Counsel magazine named this
achievement one of the five key events of the SEC
whistleblower program. Examples of the
Firm’s SEC whistleblower cases are available here.

In addition to representing SEC whistleblowers, since 1995 the
Firm’s founder, Jason R. Pickholz, has also represented many
clients in securities enforcement investigations conducted by
the SEC, FINRA, the U.S. Department of Justice and US
Attorney’s Offices, State authorities, and more. Examples of
some of the many
securities enforcement cases that Mr. Pickholz has been
involved with are available here.

You can see what actual clients have had to say about The
Pickholz Law Offices by going to the
Client Reviews page on our website or by clicking here.

How to Contact the Pickholz Law Offices LLC

If you would like to speak with a securities lawyer or SEC
whistleblower attorney, please feel free to call Jason R.
Pickholz at 347-746-1222.

The Pickholz Law Offices remains open and will be fully
operational through teleworking while we all grapple with this
terrible pandemic. We hope that all of our clients,
colleagues, friends, and their families remain safe and
healthy. Our thoughts and prayers go out to everyone who has
been affected by COVID-19.