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Statement at Open Meeting on Amendments to the Commission’s Whistleblower Program Rules

June 28, 2018

I would first like to thank the Chairman for making this rulemaking a priority. I also want to thank our staff in the Office of the General Counsel, Office of the Whistleblower, and Division of Economic and Risk Analysis for their hard work on this release. I appreciate your responsiveness to my questions, comments, and edits.

The SEC’s Whistleblower Program is a critical part of our enforcement program. Jane Norberg and her staff in the Office of the Whistleblower provide a vital service in helping protect investors. The most important part of our Whistleblower Program, of course, is the whistleblowers themselves, who bring to our attention securities law violations that otherwise might not come to light for years or even forever. They sometimes do so at great risk to themselves and their careers. Whistleblower awards offset some of those losses and, therefore, can help to encourage people to come forward. As of last year, information provided by whistleblowers to the SEC has resulted in wrongdoers paying over $975 million in total monetary sanctions, much of which has been paid back to victims.[1]

The Commission is responsible for reviewing our rulemakings to ensure they are working as intended. Good regulatory practice includes periodically conducting a retrospective review to assess what works and what can be improved. After all, as Michael Jackson—who died nine years ago this week—once noted:

If you wanna make the world a better place
Take a look at yourself and then make a change[2]

We are doing that today. In 2011, the Commission adopted a comprehensive set of rules that established the framework for our new whistleblower program. The amendments we are considering draw from our experiences with those rules to ensure that the Commission is getting the most “bang for its buck” through its Whistleblower Program. By tweaking the rules as we propose to do today, we hope to better achieve the program’s goals of eliciting useful information and appropriately rewarding people who bring that information to our attention.

Among other things, these amendments provide the Commission with greater flexibility—within the range of discretion that Congress provided us—to ensure that our payouts are appropriate. In adopting the existing rules, we put on an unnecessarily restrictive straightjacket; we deprived ourselves of the ability to exercise discretion to ensure that we are not shortchanging or overcompensating whistleblowers. Within the statutory range of ten to thirty percent of collected monetary sanctions, Congress gave us discretion—bounded by statutory criteria and additional rule-based factors that we deem important—to determine award amounts. We would not be exercising that discretion properly if we did not take into account our now extensive experience administering the Whistleblower Program. Our proposal adjusts the program’s payout options in light of this experience.

In addition, today’s proposed amendments would make clear that deferred prosecution agreements and non-prosecution agreements entered into by the U.S. Department of Justice and settlement agreements entered into by the Commission outside of the context of a judicial or administrative proceeding factor into the whistleblower payout calculation. Additionally, today’s amendments address overlaps with other whistleblower programs, update policies, practices, and procedures governing the administration of the Whistleblower Program, and bring our interpretation of the term “whistleblower” in line with the Supreme Court’s.[3]

Speaking of the Supreme Court, Justice Kennedy’s resignation announcement yesterday follows closely on the heels of Commissioner Piwowar’s resignation announcement. That is surely no coincidence. It makes Commissioner Piwowar’s next job clear. Yes, we all know that he is an economist. In the decade or so I have known him, however, he also has begun to fancy himself somewhat of a lawyer. In fact, in a couple notable instances, the courts have sided with him when he has taken a different view of the law than Commission lawyers. The Supreme Court has a vacancy. Mike likes being an economist among lawyers. He’s already survived the nomination gauntlet once. The Court seems to like hearing securities cases, so having an expert will come in handy. Regardless of whether you land at the Supreme Court, we will all miss you.

In closing, I want to again commend the staff for their hard work on this release. These amendments will make our effective Whistleblower Program even better. I am happy to support the proposed amendments and I have no questions. Thank you.

[1] U.S. Sec. & Exch. Comm’n, Whistleblower Program 2017 Annual Report to Congress at 1 (Nov. 15, 2017), available at

[2] Michael Jackson. “Man in the Mirror.” Bad, Epic Records (U.S.) and CBS Records (internationally), 1987.

[3] Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).

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