/>iAbout eight years ago, I propounded the following five theses regarding the Securities and Exchange Commission's whistleblower bounty program:
- The whistleblower program victimizes the victims of securities fraud.
- The whistleblower program creates moral hazard for the SEC.
- It is questionable public policy to award $83 million on just four people.
- The SEC's program lacks transparency.
- The cost to civil society outweighs the benefits of enforcement.
See Five Propositions Concerning The SEC Whistleblower Program. I was therefore recently pleased to see a recent public statement by Commissioners Hester M. Peirce and Commissioner Mark T. Uyeda taking the SEC to task for lack of transparency in the whistleblower program:
From the public’s perspective, as evidenced by the appearance on the Commission’s website of heavily redacted award determinations, someone at the Commission determines that this or that information should be redacted. The public is left with only limited, curated information to consider when assessing whether the award determination raises potential legal issues related to the interpretation and application of the whistleblower statutes and whether the Commission is applying its rules in a reasonable and consistent matter when it awards substantial sums of money from the public fisc.
The Commissioners also make the interesting point that everyone involved in the whistleblower process has a stake in maximizing awards:
Whistleblowers have incentives to obtain the largest award possible; the Division of Enforcement has an incentive to maximize awards as an inducement for whistleblowers to come forward; and the Commission has an incentive to maximize awards as a metric to illustrate the success of the program.
The lack of the program's transparency is therefore compounded by the lack of checks and balances of competing interests. These conditions make it highly likely that we will someday be reading about incidents of waste, fraud and abuse in the SEC's whistleblower program.
