A federal agency is moving to change a Wall Street whistleblower program.

System has governed Wall Street misdeeds

WASHINGTON — A federal agency is moving with little fanfare to revamp one of the most successful whistleblower programs in the government, alarming advocates who warn the changes will set back efforts to police Wall Street.

Much like the whistleblower system for intelligence agencies that triggered the impeachment inquiry of President Donald Trump, the program grants anonymity to people who come forward with allegations of wrongdoing. But unlike that system, it deals with the private sector, offering cash payouts to people who provide information that helps the Securities and Exchange Commission identify fraud and wrongdoing.

The program was created in 2010 by the Democrats’ Wall Street oversight law. The SEC has collected some 26,000 tips and complaints, resulting in more than $2 billion in penalties and restitution.

Now, with the backing of the business community, the two Republicans and one independent on the five-member SEC are looking to make changes to the program that Chairman Jay Clayton says will make it more effective. Final adoption of the plan is expected this month, with only a majority vote on the five-member agency needed for approval.

The proposal would give the SEC discretion to set the smallest and largest cash awards to whistleblowers, among other changes. Critics say that change would likely discourage employees from reporting major frauds.

The SEC also wants to impose new requirements for filing a whistleblower complaint. To receive legal protection from the SEC against retaliation, a whistleblower would have to report violations in writing.

Stephen Kohn, chairman of the National Whistleblower Center and a partner in the law firm Kohn, Kohn & Colapinto, said the proposed changes are “counter to every whistleblower law, rule and policy.”

The U.S. Chamber of Commerce called the proposal “a small but nonetheless important step” toward improvement.

Jacquelyn Martin The Associated Press Securities and Exchange Commission Chairman Jay Clayton, shown taking a seat at a hearing Sept. 24 in Washington, says the proposed changes to the program governing Wall Street whistleblowers will make it more effective.