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Protecting Whistleblowers since 1977

GAP Issues New White Paper – “Why Whistleblowers Wait: Recommendations to Improve the Dodd Frank Law’s SEC Whistleblower Awards Program.”

Tom Devine, February 01, 2016

Today, the Government Accountability Project released a White Paper prepared for the Securities and Exchange Commission – Why Whistleblowers Wait: Recommendations to Improve the Dodd Frank Law’s SEC Whistleblower Awards Program. GAP acted in response to largely unexplained rulings that reduced whistleblower awards due to delays in making their disclosures. In each case, their evidence had been critical for successful government enforcement actions collecting over a million dollars in penalties from corporate fraud and other SEC violations. 

GAP’s report warns that arbitrary rulings could discourage disclosures by convincing would-be whistleblowers that “the Commission’s award system neither offers proportional incentives that overcome the risks of disclosure, nor is grounded in the reality whistleblowers face…” The report is an in-depth study of the factors whistleblowers face to “do it right” when they challenge corporate misconduct, and the dangers of pressuring them to make “quick and dirty” reports. The organization noted an unresolved, confusing contradiction between Commission requirements for reports to provide evidence that is “specific” and “credible” while still being “timely,” without any guidance on how to resolve the conflict.

The White Paper is based on GAP’s experience working with over 8,000 whistleblowers since 1977, empirical studies, academic research, and a just-completed survey responded to by 1,366 whistleblowers, support organizations and whistleblower lawyers. The survey provided first-hand confirmation - with explanatory comments - on why whistleblowers often speak out, with the remote odds of partial recovery through awards only a negligible factor in their decision-making. The survey confirmed that delays unavoidably occur due to fear caused by patterns of intensifying corporate retaliation; efforts to seek family consensus; desire to give employer’s the first chance to clean their own houses and the ensuing corporate delays; desire for anonymity; fear of government confidentiality breaches; finding an affordable, trust worthy attorney, and similar factors.  

GAP calls on the SEC to clearly resolve the contradictions in its award criteria through eliminating penalties unless the delays are deliberate, and to provide specific guidance on unreasonable delays based on the real life challenges with which virtually every whistleblower must cope. The organization also recommends: expanding the SEC reporting deadline for award eligibility after an internal corporate disclosure from 120 days to one year, for consistency with other whistleblower laws; full public disclosure of the criteria that the Commission finds relevant in assessing whether delay is unreasonable; SEC staff guidance for whistleblowers considering reports; and a Citizen’s Advisory Panel to alert the SEC how its policies are working in practice with stakeholders.

GAP’s conclusion warns:

The importance of timely whistleblowing disclosures is beyond dispute. But equally important are safe, responsible disclosures for the most effective government action… Policies that increase reprisal risks while encouraging “quick and dirty” disclosures will be a ‘lose-lose-lose” result for whistleblowers, the SEC whistleblower program, and corporate employers. The Commission can and should prevent that outcome through clear guidance that balances its recent actions on delay.