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SEC to Release Proposed Whistleblower Caps: Sources



(Reuters) – The Securities and Exchange Commission is ready to reverse a proposal to impose discretionary limits on whistleblower allocations and tighten the deadlines for formally submitting tips when voting to reconsider the bounty program this week, five people informed the matter told Reuters.

The SEC on Wednesday will complete the amendments to its whistleblower program but will water these proposed measures after whistleblower advocates, lawyers and lawmakers said the changes could deter insiders from flagging corporate fraud and crime.

In 2018, the SEC proposed a revision of the program that would allow the regulator to reward tipsters whose original information results in a penalty exceeding $ 1

million with between 10% and 30% of the fine. The program was created in the wake of the financial crisis of 2009 and has resulted in more than $ 2 billion in penalties and $ 523 million in tipster rewards.

The program attracts thousands of tips annually, showing public records, overwhelming SEC staff who can take years to assess all claims and issue awards. SEC President Jay Clayton has said he sees the program as important but wants to make it more effective and speed up awards.

The SEC proposed, among other measures, to give staff more leeway when assessing the value of awards and discretion to reduce certain payments if they exceeded $ 30 million.

It also proposed requiring whistleblowers to formally submit their tips within 30 days of first contacting the agency. At present, whistleblowers can submit their tip, a lengthy legal document required to claim a reward, long after they have first come in contact with SEC personnel and a probe is in progress. the most serious scams by increasing the legal costs of submitting tips, limiting rewards and creating uncertainty. Whistleblowers face major risks and need confidence that they will be adequately compensated, lawyers say. said sources. Democratic lawmakers also wrote to Clayton on Friday, warning of reducing the reward or adding "uncertainty and ambiguity" to the program. One of them added that it will replace the proposed discretionary ceiling with a "more generous" solution without elaborating. The same person said that it would also address the issue of the submission deadline so that "in no case would a whistleblower be eligible for a prize because they contacted the SEC informally." New concerns in recent days that another provision would limit the rewards the agency can issue for related enforcement actions brought by other agencies.

Stephen Kohn, a partner in Kohn, Kohn and Colapinto, warned in a public letter filed with the SEC on Monday. that the change may deter cooperation between several regulators. Reuters could not find out if the SEC planned to address this concern.

Corporate lobbyists have been pushing the SEC to revise the program for several years. They say that excessive awards have given rise to a cottage industry of tipsters and their lawyers receiving the reward, overwhelming SEC staff with helpful and sometimes false tips. The SEC received 5,200 tips in 2019, the second highest number since the program began in 2011.

The majority of prices have been less than $ 2 million but some have been as high as $ 50 million. The SEC has said the proposed changes would ensure that rewards are "reasonably necessary" and has pointed out that additional room for discretion would also allow staff to adjust bounties upwards in cases of minor penalties. Catalog

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