Apr. 12, 2022
Comments on the Commissions Whistleblower Program Rules Chairman Gensler, Thank you for leading the efforts to correct and improve certain parts of the successful SEC Whistleblower Program. Thank you for standing firm at a time when others have said that the 2022 proposed revisions were unnecessary and unwarranted. The four proposed approaches to address related action claims are a welcome change as compared to some portions of the 2020 Amendments that lacked clarity, transparency and created uncertainty. I applaud the current Staff for proposing these well thought-out and flexible strategies that seem designed to improve related action award determinations while also getting additional awards dollars into the hands of meritorious whistleblowers more quickly. As many whistleblowers can attest to, one cannot put a price tag on closure to a whistleblower's exhausting and lonely multi-year journey. The Commission's related action award proposals would potentially allow a whistleblower to find complete closure years sooner than what currently may be the case. I encourage the Commission to seek the necessary approvals to increase the Investor Protection Fund (IPF) balance. A Fund balance floor upwards of $500 million or higher seems appropriate. Annual award amounts have significantly grown over the last couple of years, and I believe the IPF is currently lacking built-in inflation adjustments as well as other mechanisms needed to prepare for (or replenish the Fund when) one or more large, one-off awards are ready for Final Determinations (like what the CFTC recently encountered with the large $200 million award). Further, (while discussing the IPF), the Commission's proposal used alarming phrases that communicate uncertainty rather than confidence. These phrases seemed to be an extension of primary theme of the 2020 Amendments - that large payouts are risky and bad. Some of the troubling phrases about the IPF in the 2022 proposal include: "risks to the solvency" [p. 18]; "would be depleted" [p. 44, 46]; "could well exhaust" [p. 44, 46]; "insufficient amounts available" [p. 44]; and "shortfall period" [p.45, 46]. As such, the Fund balance floor should be substantially increased to account for numerous scenarios, including actions that have relatively small collected monetary sanctions but large award payouts (as described by two examples on pages 29 and 44). Also (regarding the four related action approaches), politics, staff turnover, or an assortment of other reasons could dramatically alter the determinations of whistleblower awards at other agencies, and these agencies may decide to lowball, stall or deny related action award determinations, knowing that the SEC will come through with a quicker and/or superior award payout determination. Hopefully this scenario never happens, but this is another reason to significantly increase the Fund balance floor (so that the Commission will not be hindered in the evaluation and payout of its own awards). Finally, I request that the Commission revisit and correct all other outcomes that were averse to whistleblowers as a result of the 2020 Amendments. If any part of the 2020 Amendments were unfair or created undue burdens and significant hardships for claimants, all of these revisions should be revisited. In conclusion, the SEC ought to continuously ask itself "have we done everything possible with our Whistleblower Program to encourage timely tips and thus help to prevent the next large-scale fraud, like a Madoff or Stanford?" If the answer is no, additional amendments and corrective interpretations should be proposed. Thank you for considering my comments.