SEC Commissioners Criticize Excessive Redactions in Recent Whistleblower Awards
Commentary by Kevin Harnisch
SEC Commissioners Hester M. Peirce and Mark T. Uyeda criticized the Commission's decision to heavily redact information in final whistleblower award decisions.
In a joint statement, the Commissioners argued that redactions in two recent Orders to pay $122 million to four whistleblowers went beyond what was necessary to protect whistleblower identities and prevented the public from fully understanding how such large awards were calculated.
The Commissioners said that this lack of transparency made it difficult to assess whether the SEC followed its statutory authority in issuing the awards. They urged the SEC to limit redactions to only what was necessary to protect whistleblower identities and to ensure that the facts and legal reasoning behind award decisions were more transparent.
Ms. Peirce and Mr. Uyeda also warned of misaligned incentives within the whistleblower program. They pointed out that whistleblowers, the SEC's Division of Enforcement and the Commission itself all had incentives to maximize award amounts. They argued that this misalignment created a risk that the SEC might be overstepping in its interpretation of whistleblower laws to justify larger payouts, without sufficient public oversight.
Commentary
The public has a right to know how the SEC is making determinations on whether to issue whistleblower awards and how the SEC evaluates the various discretionary factors that impact the size of the awards. Protecting the identity of whistleblowers is obviously important, but one wonders if the SEC's current approach has gone too far with the breadth of redactions such that the decisions regarding whistleblowers are doing little more than serving as a general notification of the fact of an award.