The SEC's decision on Friday to reverse Trump-era restrictions on its whistle blower program divided the five-member body, with its newest member citing concerns about the program's secrecy that were outlined in a recent report.
The program has come under scrutiny due to the fact that it doesn't have transparency. The Securities and Exchange Commissioner Mark T. Uyeda wrote in a statement that these concerns are understandable, given that the Whistleblower Program has paid out more than a billion dollars in awards since it was established.
Uyeda had a statment with a link to last month's Bloomberg Law investigation that said SEC whistleblowers decisions are inconsistent and often go to clients of agency ex- officials.
Alex Platt, a University of Kansas law professor who studied the program's lack of transparency and whose work was also cited by Uyeda, is one of the many people who have questioned the program.
Uyeda was opposed to the two measures. One change takes away the commission's ability to reduce the highest awards, while the other expands the ability of a whistle blower to get paid for their work.
Increasing the number of high-quality tips from unrepresented persons should be considered by the Commission if it wants to improve the Whistleblower Program.
Uyeda was appointed by President Joe Biden and took office on June 30. Friday's decision "set a bad precedent, risks erode the Commission's regulatory credibility, and increases costs for market participants by requiring frequent reevaluations of compliance obligations"
Hester Peirce was appointed by Donald Trump.
Peirce said that the amendments introduce a needlessly complex analysis that rests on poorly defined terms.
She said the rules are too complex and favor attorneys over people who want to report corporate wrongdoing on their own.
While this result may end up working in favor of whistle blowers with legal representation to assist them in crafting the most effective narrative, they will not fare so well.
Gary Gensler promised to revisit the rules after a lawsuit and complaints by attorneys for whistle blowers.
Attorney Jordan A. Thomas is trying to have the rule reversed. According to court records, the SEC asked the court to delay the case while it worked out a solution to the case.
The commission and Thomas asked the court to keep the case on hold so that new rules could be put in place.
Attorneys wrote that the commission is making progress on the rulemaking. In light of anticipated rulemaking regarding the rules at issue in this matter and the time necessary for approval of a final rule, it is appropriate to keep this action in place.
The reporter for this story is John Holland.
To get in touch with the editor, please email bkohn@bloomberglaw.com.
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