October 22, 2019
October 22, 2019 Re: Proposed Amendments to the SEC's Whistleblower Program Rules To the Staff and the Commissioners: Please consider the following in connection with your contemplated adoption of amendments to the SEC's whistleblower program (the "SEC Program") rules: 1. FOR - Allowing awards based on DPAs and NPAs entered into by DOJ or State AGs or settlement agreements entered into by the Commission - Providing clarity that these alternative forms of case resolution are included in the definition of an "action" is consistent with the SEC Program's objectives and this proposed change should be adopted. I strongly support this change. I also support the proposed changes to the definition of "monetary sanctions. However, I strongly and vehemently oppose the proposed clarifying changes to the definition of "related action" that would prohibit recovery by a whistleblower if the other authority's enforcement action "was in some manner 'based upon' the results or findings of the Commission's enforcement action without the other authority ever actually receiving and utilizing the whistleblower's original information." To further the goals and objectives of the SEC Program, the Commission should not be arbitrarily limiting potential recoveries by whistleblowers that have put their lives, names and careers on the line to expose fraud or wrongdoing. If a whistleblower provided information to the SEC that led to a successful enforcement action where $1 million or more was recovered, then every enforcement action that was spawned from or derived from or otherwise brought in whole or in part as a result of the whistleblower initially providing any original information to the SEC should be a "related action" and "based upon" the information provided to the SEC. In other words, if the other enforcement actions would not have arisen "but for" the whistleblower providing information to the SEC that initially led the SEC to open an investigation, then why would the Commission desire to punish the whistleblower by not paying the whistleblower for any and all enforcement actions that were directly or indirectly the result of the whistleblower's initial action to speak up and provide information to the SEC. The Commission should be taking an accommodating rather than restrictive view in amending the SEC Program with a goal to encouraging more whistleblowers to speak out rather than proposing amendments that could have a chilling affect on whistleblowers coming forward. We should be making it easier, not more difficult for whistleblowers to receive awards and we should provide them as much incentive as possible to come forward. Unless and until you find yourself in the incredibly stressful and scary position that many whistleblowers find themselves when considering whether to come forward, you will never know the emotional and financial turmoil these individuals and their families experience and we should be doing everything we can to provide these individuals as much benefits as possible so that they can then pay it forward and assist and support other would-be whistleblowers. 2. FOR - Elimination of potential double recovery under the current definition of related action - This proposed change is reasonable and no whistleblower should reasonably expect double or triple recoveries arising out of the same nucleus of facts. That being said, to avoid the risk that a whistleblower could be denied recovery from another agency/program (possibly due to a technicality or other reason under the other agency's/program's requirements) and to avoid the whistleblower getting the run around or short changed, it would be helpful if the Commission could require written confirmation from the other agency/program of the whistleblower's eligibility under such other program and the other agency's/program's agreement to pay an award to the whistleblower prior to the Commission reducing a whistleblower's award under the SEC Program. 3. AGAINST - Discretionary reductions to "exceedingly large" awards - I reiterate Senator Grassley's comments on this issue and, as a whistleblower, I implore you not to adopt this proposed change at all or, at a minimum, adopt it prospectively only so that it applies only to information/tips/complaints first provided to the SEC after the date of the adoption. If adopted and applied to pending matters, I suspect this change will be subjected to legal challenge on due process and perhaps other legal grounds. Adoption of the current proposed changes on this point are contrary to the SEC Program objectives and are contrary to the statutory language and intent. Further, "exceedingly large" is inherently subjective and any exercise of discretion on large awards is fraught with the risk of political influence being brought to bear to avoid paying a whistleblower amounts that would not have been recovered but for information and assistance provided by the whistleblower. Whistleblowers have no doubt already relied upon the existing framework in providing information to the SEC on matters that are currenty pending or being investigated and it would be a gross injustice to now, after the fact, reduce a potential 30% payout to a whistleblower simply because the amount of such payout would be "exceedingly large" in the views of 3 of the 5 politically appointed Commissioners. If the Commission proceeds with its current proposals on this issue, I predict strong vocal and legal opposition which is sure to undermine the reputation of and the public's current confidence in the SEC Program while doing what may be irreparable harm to collective willingness of whistleblowers to step forward for fear that any recovery could be subjected to the political leanings of the Commissioners in office at the time the final award amount is determined, a majority of whom may have changed as a result of a change in the political party of the President. Please do not politicize the SEC Program. 4. FOR - Discretionary increases to "small" awards - Although it might sound hypocritical to do so given Comment 3 above, I support this proposal because it would increase rather than decrease the amount that a whistleblower might otherwise receive. Whistleblowers take enormous personal risks to expose fraud and wrongdoing - reputational, financial, emotional, legal, familial relationship, career and collateral consequences risks - and whistleblower payouts under the existing framework may fail to adequately compensate whistleblowers for the risks undertaken or the harm suffered. I would suggest that you consider changing the $2 million references in the proposed rules to $5 million because $5 million seems a more reasonable and appropriate cutoff for defining a "small" award, especially in high cost of living locales from where the vast majority of whistleblower tips/complaints are likely to originate. 5. FOR WITH SUGGESTIONS - Proposed amendment to Rule 21F-2 - I don't object to this proposed amendment to conform to the SCOTUS opinion in Digital Realty, but I would encourage the Commission to consider including in its discussion on this proposed amendment other existing protections for whistleblowers under Sarbanes-Oxley Act Sections 806 (18 USC 1514A) and 1107 (18 USC 1513 - Retaliating against a witness, victim or informant), as well as the OSHA anti-retaliation complaint submission process and the 180 day filing requirement for certain classes of employee whistleblowers. It seems there has been so much focus and discussion on the Dodd-Frank ACT anti-retaliation provisions that people have perhaps forgotten about the Sarbanes-Oxley Act anti-retaliation provisions and OSHA complaint submission process. 6. AGAINST - Guidance regarding "unreasonable delay" in existing Rule 21F-6(b)(2) and proposed Rule 21F-6(c) - If I'm not mistaken, under the SEC's current rules certain classes of whistleblowers are required to wait 180 days after reporting internally before reporting to the SEC in order to be eligible for an award. Also, certain classes of whistleblowers are required to file a complaint with OSHA and exhaust administrative remedies? How is this proposed guidance regarding "unreasonable delay" supposed to integrate with the SEC's existing rules requiring this class of whistleblowers to wait 180 days after reporting internally or having to wait until OSHA issues an opinion? Please reconsider the SEC's existing rules and the proposed guidance. If a certain class of whistleblower is required to wait 180 days before going to the SEC, then having a "presumatively unreasonable" standard apply if that whistleblower later approached the SEC seems non-sensical. 7. OTHER - Consider more forcefully reiterating that a whistleblower that reports only internally initially (1) is still entitled to employment retaliation protections under Sarbanes-Oxley Act Sections 806 and 1107 and (2) may subsequently file a Form TCR with the SEC after suffering adverse employment action (e.g., being fired) following an initial internal report and thereby become a "whistleblower" for purposes of Dodd-Frank's award and employment protections. The current proposed rule amendments fails to discuss that a person may initally be a "whistleblower" solely entitled to Sarbanes-Oxley protections after making an internal report, but may subsequently become a "whistleblower" within the meaning of Dodd-Frank (post-Digital Realty Trust v. Somers) by filing a Form TCR with the SEC containing the same information previously reported internally or previously provided to OSHA, in the case of the class of whistleblowers required to first file a complaint with OSHA (see comment 6 above). I have no comments on the other proposed amendments that have already been commented upon by others. Thanks for your consideration of my comments.