President-elect Donald Trump, who has vowed to tear down six years of financial regulation, may spare the whistle-blowers.
Two Republican lawmakers with sway in the Trump camp, Senator Charles Grassley of Iowa and Representative Jeb Hensarling of Texas, have voiced support for programs meant to reward workers who bring allegations of governmental wrongdoing to U.S. officials. That gives recent whistle-blower rules a degree of political cover that doesn’t necessarily extend to other financial regulations made possible by the Dodd-Frank Act of 2010.
“My sense is that unless there’s a complete repeal of Dodd-Frank, the whistle-blower statute will survive,” said Jill Rosenberg, an expert on employment law and a partner at the Orrick law firm in New York. “There’s been bipartisan support for the bounty program. It hasn’t been attacked like regulatory aspects” of the law.
What’s less clear is whether the programs will keep their current form or support.
Conservative groups such as the U.S. Chamber of Commerce have been critical of the whistle-blower protections, saying they undercut expensive internal compliance programs and pose a conflict between employees’ self-interest and the interest of their employers. Republican policy makers are generally wary of harsh corporate sanctions that are the basis for tipster rewards. Paul Atkins, a former SEC commissioner who is leading financial appointments for the incoming administration, is a critic of Dodd-Frank who argues that penalties against corporations harm shareholders rather than wrongdoers.
Trump hasn’t signaled whether his administration would continue apace with enforcement actions by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At stake is the fate of a whistle-blower ecosystem that emerged rapidly after authorities offered anonymity, protection from retaliation and large potential rewards to employees coming forward with allegations of wrongdoing. Whistle-blowers have provided a new pipeline of cases for enforcers while supporting a cottage industry of law firms that bring them.
Regulators have credited the programs with helping to stamp out fraudulent investment schemes and wrongdoing by large institutions. The SEC has paid out more than $130 million since issuing its first reward in 2012, and this week it announced the third-largest whistle-blower reward on record -- $20 million to a person it said helped the agency uncover securities violations and recoup investor funds. As usual, the agency didn’t identify the person or the company involved, citing the confidentiality provisions in the law.
Focus on Growth
Trump’s financial-services team will aim to replace Dodd-Frank with “new policies to encourage economic growth and job creation,” according to his transition website, GreatAgain.gov. The Trump team specifically cites the Consumer Financial Protection Bureau and restrictions on banks’ trading activity as targets for cuts. The site doesn’t mention whistle-blower regulations.