The Future of the SEC Whistleblower Program: Post-Election
Concerns of SEC Whistleblowers and SEC Whistleblower Lawyers,
Part 1

Several clients have called me during the past week with
concerns about what, if anything, the U.S. Presidential
election results mean for the future of the SEC whistleblower
program.  If you are an SEC whistleblower, potential SEC
whistleblower, or SEC whistleblower lawyer, you may have
similar concerns.

For this reason, I have decided to write a slightly different
type of post this week to present some of my thoughts on this
question.  Today’s post will consist of my own
personal thoughts and opinions, based on over 22 years of
experience as a lawyer interacting with the Securities and
Exchange Commission; I spent my first 16 years primarily as a
white collar and SEC defense lawyer, and the last 6 years
almost exclusively as an SEC whistleblower lawyer.  These
are my own personal opinions — not facts, promises, or
guarantees.  Opinions set forth herein are not legal
advice, and should never be considered as a substitute for
consulting with your own SEC whistleblower lawyer.

*     *     *

Before I get into the current election, it is important to
keep in mind that what we are talking about is a change in
administration.  We have elected new Presidents before,
and we will elect many more in the future.  Each time a
new President has taken office, he has brought with him his
own ideas about law enforcement priorities.  Some past
Presidents have placed a higher priority on certain categories
of securities frauds and crimes; others have emphasized other
types.  Some administrations have increased the
SEC’s budget; others have reduced it.  What they
have all had in common, though, is that since the SEC was
created over 80 years ago, no President has ever shut the
agency down or refused to enforce the securities laws.

The Dodd-Frank Act was enacted in 2010.  The SEC
whistleblower program was created as part of the Dodd-Frank
Act.  Since the Dodd-Frank Act came into being six years
ago, certain of its provisions have been under attack. 
This is nothing new, and calls to “get rid of
Dodd-Frank” did not suddenly pop up out of the blue in
the recent Presidential election.

That phrase — “get rid of Dodd-Frank” —
understandably scares SEC whistleblowers and SEC whistleblower
lawyers.  However, if you go and look at what the critics
in the U.S. Congress are actually complaining about, they tend
to focus on sections of the Dodd-Frank Act other than the SEC
whistleblower provisions.  Typically the provisions they
object to are ones that place capital (financial) burdens on
companies, or impose additional and, according to the critics,
costly reporting or administrative burdens on companies. 
While big companies and some lobbyists focus on the supposed
costs and burdens to “big” businesses,
i.e., “Wall Street” or “Corporate
America”, many politicians and others are equally or
more concerned about the burdens those regulations place on
regional or local businesses and banks that are still
struggling to recover from the Great Recession, i.e.,
“Main Street”.

Recently, some politicians have criticized the SEC’s
increasing use of its own in-house administrative courts, a
trend that has been increasing over the last couple of years,
rather than bringing its cases in federal court.  But the
SEC has had and used its administrative courts for a long
time, since well before the passage of the Dodd-Frank
Act.  The in-house courts issue is more about curtailing
an internal practice that is becoming more prevalent than
about a particular provision of the Dodd-Frank Act.

Early on, “Wall Street” and “Corporate
America” vigorously opposed the SEC whistleblower
program provisions.  Congress enacted the SEC
whistleblower award program anyway.

After the Dodd-Frank Act was passed, the SEC was charged with
creating rules to implement the whistleblower program
provisions.  While the SEC was trying to decide what the
rules should be, “Wall Street” and
“Corporate America” lobbied the SEC aggressively
in an attempt to take the teeth out of the program.  One
of their big arguments was that the SEC whistleblower program
would convince their employees to not report problems
internally, and would instead motivate employees to run first
to the SEC in the hopes of getting a financial award.  In
response, the SEC passed a rule that said that if an employee
reports first to an employer and then to the SEC, that would
be a factor that could increase the whistleblower’s
eventual SEC award.  But the SEC specifically said that
if an employee does not report to his or her employer, first
or ever, that will not count against the whistleblower come
award time.

Even if the “report internally first” argument
were to surface again, it would not seem to be a cause of much
concern for the majority of SEC whistleblowers. 
According to the SEC, despite the fact that the Rules do not
require SEC whistleblowers to report internally to their
employers to be eligible to receive an award, “Of the
award recipients who were current or former employees,
approximately 80% raised their concerns internally to their
supervisors or compliance personnel, or understood that their
supervisor or relevant compliance personnel knew of the
violations, before reporting their information of wrongdoing
to the Commission.”  (SEC 2015 Annual Report to
Congress on the Dodd-Frank Whistleblower Program, pp. 16-17.)

The SEC’s Rules governing its whistleblower program
became effective in August 2011.  In the five years since
then, even “Wall Street” and “Corporate
America” seem to have accepted that the SEC
whistleblower program is here to stay.  And while they
may still grumble occasionally about how the SEC implements
the program, they seem to have largely given up on trying to
get rid of the SEC whistleblower program itself.

The phrase “get rid of Dodd-Frank” is a political
rallying cry or buzz phrase.  It is also easier, and more
sensational, to publish a short attention-grabbing headline of
“repeal Dodd-Frank” than it is to write out the
specific provisions that are under attack and why, if they
would even fit in the space allotted for a title or tag
line.  What “get rid of Dodd-Frank” seems to
mean is that some politicians want to either change or get rid
of certain provisions of the Act.

Like administrative changes when a new President is elected,
we have seen many laws that have undergone change. 
Again, this is nothing new, and the recent election is not the
first time that the idea of changing certain laws has
arisen.  Just about every Presidential candidate (maybe
every candidate) has campaigned on a platform to change
certain laws that he/she or his/her party does not like.

If changes are made to the Dodd-Frank Act, those changes can
take several different forms.  They can be amendments
that add new provisions to the existing law.  They can be
changes or modifications to certain provisions, without
scrapping those provisions in their entirety.  They can
involve repeals of specific provisions, lifting those
provisions out of the law, while leaving the remainder of the
law intact.  A repeal of the entire Act is possible, but
only likely where there is overwhelming or unanimous consensus
that the Act has failed to achieve or no longer serves its
intended purpose.  Even then, a total repeal of the
Dodd-Frank Act, without the passage of a new Act to replace
it, could be political suicide in the current social and
economic climate.

It has been reported that both political parties, Republican
and Democrat, agree that certain business practices need to be
reigned in, and that financial frauds are a serious issue
facing the country.  The disagreement seems to be over
how best to address these issues, not over whether they need
to be addressed.

The SEC whistleblower program is a completely separate,
stand-alone provision, with a completely separate purpose from
the financial and reporting provisions, or questions of
internal SEC procedures.  No U.S. Senator or Congressman
who I am aware of has made a credible call for the repeal of
the SEC whistleblower award program, at least none that have
gained any widespread political or media support.

For the reasons set forth above, whatever the new
administration does with regard to the Dodd-Frank Act, it is
highly doubtful that it will get rid of the SEC whistleblower
award program.  I will address some additional reasons
for this belief in Parts 2 and 3 of this post.

For Part 2 of this Post, click
here. ->

For Part 3 of this Post, click
here. ->

* * *

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
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