Sep. 09, 2020
To the SEC: Thank you for your service in the financial markets. On September 1, 2020, the SEC once again delayed its vote on the proposed changes to the whistleblower rules. Thank you for your reconsideration of the proposed changes to the whistleblower rules. In the newly proposed rules, the SEC proposes changes for "independent analysis". From page 97 of the SEC's proposed changes to the whistleblower rules: "In order to qualify as “independent analysis,” a whistleblower’s submission must provide evaluation, assessment, or insight beyond what would be reasonably apparent to the Commission from publicly available information." And what of "Independent knowledge" in this regard? Independent knowledge by an insider may also yield a conclusion which "could have been inferred from the facts available in public sources", if the matter could have once been "inferred" from a publicly available source in the years leading up to the completion of an SEC action. The newly proposed "reasonably apparent" standard, however, has rightly been omitted from the "independent knowledge" side of the ledger regarding "original information". The newly proposed standard of "reasonably apparent" should be dropped from the entirety of the SEC's proposed rules - as it has been from "independent knowledge". The SEC already has three substantial prongs to rightfully restrict publicly available information in "independent analysis". The whistleblower's information, among other things, 1) cannot be "already known to the Commission", 2) cannot be exclusively derived from, among other things, "the news media", and 3) must be "not generally known". Having fulfilled all the current requirements, AND having "led to the successful enforcement" of a Commission action, the Commission, going forward, under the proposed rules, may now have a pathway to wrongfully renege on the whistleblower award at the last step of a multi-year process. Footnote 235 of the proposed whistleblower rules hints that the Commission currently does hope to escape into this repugnant conduct, even for whistleblowers providing information that "led to a successful enforcement", by merely declaring the jilted whistleblower to have performed "a public service". The former Head of the SEC's Whistleblower Office, Sean McKessy, correctly notes in his October 25, 2019 comments that the newly proposed "reasonably apparent" language is "factually impossible to meet" and should be eliminated from the proposed rules. Accordingly, the existing standard, which already contains, among other things, the three substantial prongs listed above, should be retained, as they were during Mr. McKessy's tenure at the SEC. The CFTC whistleblower rules for independent analysis are materially similar to the SEC whistleblower rules for independent analysis. CFTC officials have encouraged the public to submit whistleblower tips based on publicly available information that meets the definition of independent analysis in the CFTC rules. On Twitter, CFTC officials have publicly and specifically solicited whistleblower tips that are based on publicly available information. The SEC should similarly encourage the public to perform independent analysis that conforms to the substantial restrictions already provided in Section 21-F (see above). Over time, this will result in the disruption of billions of dollars of fraud on the public that would otherwise go undetected, or at least lead the Commission to discover billions of dollars in fraud sooner in time. Thank you again, T.S.D.