Hester M. Peirce is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent public statement. The views expressed in this post are those of Ms. Peirce and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
I did not support the proposal to amend the Commission’s whistleblower rules, and cannot support the amendments adopted today. [1] The Commission’s whistleblower program is successful, increasingly so in recent years. [2] Today’s amendments, although themselves inconsequential and unlikely to inhibit that success, nonetheless carry harmful consequences both for the whistleblower program and for the Commission’s rulemaking processes.
Inconsequential Amendments
The amendments adopted today closely track those proposed in February, and continue to be solutions in search of a problem. Indeed, the adopting release indicates that the Rule 21F-3(b)(3) amendments adopted today are inconsequential. According to the economic analysis, if this amended version of Rule 21F-3(b)(3)—the “Multiple-Recovery Rule”—had been in effect since July 2010, “it would have resulted in an additional total payout [to whistleblowers] of less than $10.5 million.” [3] The Commission’s whistleblower program has paid out more than $1.1 billion since 2010. [4] A 1% increase in the total payouts is not much of an “additional incentive[] to encourage individuals to report potential violations of the federal securities laws.” [5] Granted, past awards are not perfectly predictive, but the adopting release provides no data or analysis to indicate that future related action awards will be different in type or amount from past awards. Instead, the release cites to “economic literature” of no apparent relevance that leads the Commission “to believe that changes such as these that increase whistleblowing incentives should have a positive effect on the frequency of whistleblowing activity.” [6]
