Some Whistleblowers Have Concerns About the SEC’s Interpretation of “Independent Analysis”

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A new rule interpretation announced by the Securities and Exchange Commission has created concern among whistleblowers, who believe it could weaken incentives for whistleblowers to come forward with information about corporate fraud.

The clarification officially went into effect on Monday, December 7. It says any tip from a whistleblower must provide insight “beyond what would be reasonably apparent” to the SEC from any information that is already publicly available.

Whistleblower lawyers and those who have already received whistleblower awards are concerned this could make it more difficult for external whistleblowers to get awards under the program, in which there are already very low odds of getting paid for submitting information.

The SEC Whistleblower Program

Under the SEC’s whistleblower program, anyone who has original information of potential fraudulent activity can file a tip with the SEC. However, the only people who are eligible for payouts are those whistleblowers whose unique, actionable information results in enforcement actions of greater than $1 million.

The new interpretation of “independent analysis” could, according to critics, result in the commission rejecting even more payouts, and even further raising the bar for potential awards to the point that it would disincentivize people from coming forward with information they have about wrongdoing.

The effects remain to be seen, but the whistleblower program from the SEC has grown so rapidly largely because of the significant monetary awards qualifying tipsters can take home. In the fiscal year that ended September 30, the program received a record 6,911 tips.

For more information about filing a claim with the SEC’s Whistleblower Program, contact an experienced attorney at Kardell Law Group.

By Steve Kardell | Published February 11, 2021 | Posted in Whistleblower Litigation | Tagged corporate fraud, financial fraud, SEC rules violations

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