The following is from part of a 3-part blog about the future of the SEC whistleblower program. It was originally posted on The Pickholz Law Offices’ website during the week of November 14, 2016. To see the blog as originally published, please click here.
In this 3-part post, I am addressing the question of what the results of our recent Presidential election might mean for the future of the SEC whistleblower program. If you are an SEC whistleblower or SEC whistleblower lawyer, you may have been asking yourself this question lately.
As I stated at the beginning of Part 1, these are my own opinions based on over two decades of experience, including the last six years since the Dodd-Frank Act was passed as an SEC whistleblower lawyer. Nothing herein should be construed as legal advice. Nor should anything herein be considered as a substitute for consulting with your own SEC whistleblower lawyer.
In addition to what I wrote in Part 1, another thing to keep in mind is that while the SEC’s whistleblower program may be the best-known whistleblower program right now, it is neither the first nor the only whistleblower award program that the country has. During the Civil War, there was a significant problem with suppliers defrauding the government and the army. In response, Congress passed the False Claims Act (“FCA”) in 1863. Speaking generally, the FCA rewards people for blowing the whistle on frauds against the federal government. The FCA was amended and strengthened several times. Another program is the Internal Revenue Service (“IRS”) whistleblower program, which has been around for over 100 years. In 2006, the IRS’s program was amended to improve its efficiency. Since 1863, those whistleblower programs have survived through 28 different Presidents, both Republican and Democrat. Those programs have not been repealed. If anything they have been reaffirmed or even enhanced.
Some SEC whistleblowers and SEC whistleblower lawyers may nevertheless be concerned that the current calls to “get rid of Dodd-Frank” seem to be emanating most vocally from certain Republican politicians, including President-elect Donald Trump. They are especially concerned because, in the recent national election, the Republican Party also maintained a majority in both the U.S. Senate and the U.S. House of Representatives.
To address this particular concern, a bit more history may prove enlightening. The FCA was enacted under President Abraham Lincoln, who started as a Whig and later became a Republican. Amendments and improvements to the FCA have been made under both a Republican President (President Regan) and a Democratic President (President Obama). The improvements to the IRS whistleblower program were enacted under President Bush, a Republican. If history is any guide, while the current fight over the Dodd-Frank Act may seem to be drawn along party lines, once enacted, federal whistleblower programs have historically enjoyed bi-partisan support.
More recently, on October 27, 2014, eight members of the U.S. House of Representatives’ Committee on Financial Services sent a letter to the Chair of the SEC, urging the SEC to take greater measures to protect SEC whistleblowers. While the eight signatories were Democrats, the letter was written on the Committee’s letterhead listing Jeb Hensarling as Committee Chairman. Although Chairman Hensarling, a Republican, did not sign that letter, this summer he proposed his own financial reform act, called the Financial CHOICE Act. In Chairman Hensarling’s remarks, while he did not address the SEC whistleblower program specifically, he did claim that his proposed CHOICE Act will “impose the toughest penalties in history for financial fraud, self-dealing and deception.”
Whistleblower programs have also been embraced at the State level. Approximately half of the States, if not more, have their own versions of a False Claims Act. Since the SEC whistleblower program came into effect in 2010, some States, such as New York, have entertained the idea of passing their own financial whistleblower programs. A few foreign nations or agencies have also implemented their own financial whistleblower programs, such as the Ontario (Canada) Securities Commission’s whistleblower program (2016), which offers a financial award, and the United Kingdom’s Financial Conduct Authority’s whistleblower rules (2015), which offer whistleblowers protections but no financial awards. While these State and foreign programs may have little direct relevance to the SEC whistleblower program, they demonstrate that the current mood is shifting toward recognizing, protecting, and rewarding whistleblowers, not moving away from them.
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