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Statement on Proposed Amendments to the Commission’s Whistleblower Program Rules

June 28, 2018

I would like to join Chairman Clayton in thanking the staff in the Whistleblower’s Office, the Office of the General Counsel, and the Division of Economic and Risk Analysis for their hard work on this proposal.

The Securities and Exchange Commission’s Whistleblower Program was created by Congress in 2010 to encourage the reporting of illegal conduct in our markets. To achieve this goal, the statute says the Commission shall give eligible whistleblowers awards of 10 to 30 percent of the money collected in actions brought as a result of information provided by the whistleblower. By all accounts, the Whistleblower Program has been a resounding success.[1] From the time the Commission’s whistleblower rules were adopted in 2011 until the end of 2017, the Commission has received over 22,000 whistleblower tips. These tips have resulted in more than $1.4 billion in financial remedies.[2] Of this amount, the majority has gone back to harmed investors,[3] but a substantial amount has also been sent to the United States Department of the Treasury.

Today’s proposal would make various changes to the Commission’s Whistleblower Program, many of which I support and believe will be good for the overall Program. At the same time, I am also concerned about some of the proposed changes because I fear they could threaten the Program’s ongoing success.

First, I am deeply troubled that the proposal would give the Commission authority to depart from its normal analysis for determining the amount of an award in certain circumstances. Currently, to determine the precise award percentage, the Commission considers a list of specific factors, such as the significance of the information provided by the whistleblower.[4] However, under the proposed Rule, the Commission would, in certain circumstances, be able to consider not just the enumerated factors, but also the overall dollar amount of the award. Practically speaking, this means the Commission can reduce the award if, in its sole discretion, it thinks the award is “too large.” I am worried that this subjective determination will be used as a means to weaken the Whistleblower Program.

To understand why I am worried, it is important to first understand how the Whistleblower Program works. The money awarded to whistleblowers comes from a special account at Treasury. This account is funded by the monetary sanctions the Commission collects from wrongdoers, not by taxpayers.[5] Congress’ idea behind the Whistleblower Program was to use money from wrongdoers to clean up the markets. This makes sense and it is good public policy. Yet, this proposal suggests that the Commission is unduly worried that the Whistleblower Program may be taking money from other worthy uses. This is not so. The Commission has sent billions of dollars to the Treasury since 2011.[6] This is money that, if needed, could have been used to fund whistleblower awards. But in fact, we have used only a tiny fraction of this amount—$266 million—to award whistleblowers.[7] Furthermore, successful whistleblower tips have resulted in $1.4 billion being returned to harmed investors or being sent to Treasury. Indeed, the amount of money the Commission has sent to Treasury alone as a direct result of whistleblower tips far exceeds the $266 million provided to whistleblowers for bringing wrongdoing to light. Simply put, the Whistleblower Program has more than paid for itself. There are not many government programs that can make that claim.

So why do we have today’s proposal before the Commission to limit the size of whistleblower awards?[8] We have no evidence that there is a problem. Nor do we have any evidence of how the proposed $30 million threshold would affect the incentives or behavior of whistleblowers. The proposal states this change is needed to ensure that whistleblower awards do not “exceed an amount that is appropriate to achieve the goals and interests of the program.” However, we do not have the necessary facts to show that $30 million, or any other number for that matter, is the point at which there magically starts to be diminishing returns for whistleblower awards. I worry that we are creating a $30 million glass ceiling.

In addition, I am not sure we actually have the authority to take today’s proposed action. In the whistleblower statute itself, Congress specifically told the Commission that we could “not take into consideration the balance of the Fund” in determining the amount of an award.[9] In a nod to this specific direction from Congress, the proposed Rule states “the Commission shall not consider the balance of the Investor Protection Fund (“IPF”) when determining whether to make an adjustment to an award under this provision.”[10] However, three sentences later the proposed Rule states that when determining how to adjust the dollar amount of an award “the Commission shall consider . . . the potential impact any adjustment might have on the IPF.”[11] It seems to me that considering the “impact” on the Fund versus the “balance” of the Fund when determining an adjustment to the size of an award is a distinction without a difference. It is legalistic nonsense. In reality, the rule proposes to do something that on its face appears inconsistent with the explicit instructions we received from Congress.

In its justification for this departure from the law, the proposal states that that we should take the balance of the Fund into consideration because the money the Whistleblower Program generates could be sent to Treasury for “other important public purposes.”[12] Frankly, I’m not sure what this really means. I can only imagine that the release is suggesting that the Commission be mindful of other federal budget priorities and its place within government writ large. I, too, believe in the notion of “good government.” But, the Whistleblower Program is exactly that—good government. It incentivizes the private marketplace to better surveil itself and has resulted in the government bringing cases against fraudsters it might not have otherwise discovered. Incentivizing market participants and others to provide information about wrongdoing has helped protect more investors, preserve the integrity of our capital formation process, and ensure that our markets are fair and efficient. In many ways it has aligned incentives so that the government is able to use its scarce resources in a more efficient manner.

In addition to the proposed Rule’s provisions limiting award size, I am also concerned about the guidance being proposed today. This guidance is supposed to help clarify what “independent analysis” means. I am not sure that it does. So, I would ask commenters to look at this guidance carefully and tell us whether it helps or hinders your understanding of what independent analysis means. Does the guidance appropriately draw the line between meritorious and non-meritorious whistleblower cases? In effect, how should the Commission define “independent analysis”? Does the Rule text and the proposed guidance appropriately define the type of whistleblowing activity that should receive an award? If not, what should the Rule text and/or guidance be? I look forward to your best thoughts on these issues.


As I mentioned earlier, there are many good parts of today’s proposal and I thank the staff for their hard work on those items. However, I simply cannot support the recommendation as a whole, because I do not think we have the authority to limit whistleblower awards in the manner proposed. Congress has spoken on this issue, and we need to follow the law.

Thank you, and I look forward to receiving comments on these many issues.

[1] See, e.g., The SEC as the Whistleblower’s Advocate, Speech by SEC Chair Mary Jo White, April 30, 2015, available at (stating the Whistleblower Program “has proven to be a game changer” and that the program has increased the SEC’s efficiency and conserved its scarce resources); David Floyd, The SEC Whistleblower Program’s Quiet Success, Investopedia (Sep. 26, 2016), available at; Jason Zuckerman and Matt Stock, One Billion Reasons Why the SEC Whistleblower-Reward Program Is Effective, Forbes (Jul. 18, 2017), available at (“[T]he program has proved to be an unmitigated success in enabling the SEC to discover fraud, protect investors, and prevent another financial crisis.”)

[2] Release at 8.

[3] Id.

[4] 17 CFR § 21F-6. Other factors include the assistance provided by the whistleblower, the Commission’s law enforcement interests, the whistleblower’s participation in internal compliance systems, the whistleblower’s culpability in the wrongdoing, any unreasonable reporting delay, and any interference with internal compliance and reporting systems.

[5] Generally speaking, once the Fund falls below $300 million, any monetary sanctions collected in SEC enforcement actions that aren’t returned to investors are deposited into the Fund until the Fund again exceeds $300 million. 15 U.S.C. § 78u-6(g) If the amount of money deposited into or credited to the Fund is not sufficient to satisfy an award, then the Commission will deposit enough money into the Fund from the monetary sanctions collected by the Commission in that particular action to pay the unsatisfied portion of the award. Id. It is unlikely that this would happen, but if this is what is truly motivating the desire to limit whistleblower awards, a $30 million award seems unlikely to cause this problem.

[6] SEC Agency Financial Reports for fiscal years 2011-2017, available at

[7] Release at 8.

[8] The release suggests that the proposal is not a cap on potential awards, but is simply a means by which the Commission can retain flexibility to reduce an award to the extent it deems appropriate. I reject this assertion in part for the reasons I discuss below. In addition, I believe that the means by which the proposal provides such flexibility would have the practical effect of serving as a cap.

[9] 15 U.S.C. § 78u-6(c)(B)(ii).

[10] Proposed Rule 21F-6(d).

[11] Proposed Rule 21F-6(e).

[12] Release at 13.

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