House Quoted in Law360 About Impact of Proposed SEC Rule Limiting Whistleblower Amounts

Partner Bryan House was quoted in the Law360 article, “Top Whistleblower Bounties At Stake As SEC Preps Rule Vote,” about whether a proposed SEC final rule to give the agency leeway to cut the size of the largest whistleblower awards will  discourage individuals with the most valuable tips from coming forward.

The SEC has recently paid out some of its largest and most head-turning whistleblower awards, including a record-setting $50 million payout in June and a $37 million award in March, which whistleblower proponents say encourage would-be tipsters to speak out. But under the rule proposed in July 2018, the agency would have discretion to adjust downward the award amounts for cases that yield over $100 million in total sanctions and at least a $30 million bounty. Awards of that magnitude have been few and far between, with just seven eclipsing the $30 million figure in the history of the program. Whistleblower attorneys and others warn that limiting the largest awards could discourage tipsters from coming forward while watering down the stern warnings the awards send to Wall Street and corporate America.

House said he doubts whether limits on the largest awards would have much of an impact on whistleblowers or the program.

“I doubt that [whistleblowers] are thinking, ‘Gee, if it’s $50 million then I’m going to the commission, but if it’s $30 million I’m not,'”  he said. “And I don’t think that cutting back the size of the awards undercuts the program. It’s still a lot of money.”

House said the provision giving the SEC the discretion to increase the smaller awards shows that the proposed rule is not one-sided or detrimental to the program. “There are certainly some things in these rules that are pro-whistleblower, so I don’t know that you can paint with a broad brush and say that this is a sign that they’re trying to weaken the program,” House said.

At the end of the day, House said his clients are indifferent to the award size provisions of the rule.  “The amount of money that the SEC pays whistleblowers is not really of a lot of interest to our clients,” he said. “They don’t really have a dog in the fight. They understand the program, they accept it, they’ve done a lot of work to address whistleblowers, but what the whistleblower payout is is not much of their concern.”