The Securities and Exchange Commission (SEC) will review two Trump-era changes to the agency’s whistleblower program, with an eye toward encouraging individuals to report wrongdoing.

SEC Chair Gary Gensler said Monday he has ordered agency staff to review the changes approved under former Chair Jay Clayton’s term. One amendment could preclude the SEC from offering a whistleblower award if another federal agency could issue a payout on a related case. The other allows the SEC to potentially lower the size of a large ($100 million or more) whistleblower award, instead of calculating the bounty as 10 to 30 percent of the total settlement, as the program’s rules expressly state.

“I have directed the staff to prepare for the Commission’s consideration later this year potential revisions to these two rules that would address the concerns that these recent amendments would discourage whistleblowers from coming forward,” Gensler said in a statement.

Gensler went on to say staff will review whether it is permissible for the SEC “to make awards for related actions that might otherwise be covered by an alternative whistleblower program that is not comparable to the SEC’s own program, and to clarify that the Commission will not lower an award based on its dollar amount.”

The SEC followed up Gensler’s statement by issuing a new interim procedure for handling whistleblower complaints while the rule changes are under review. The new rules indicate the SEC will not seek to lower a whistleblower’s award, even if it exceeds $100 million, and if the agency determines another whistleblower program is more suited to issue an award, the whistleblower can request the SEC’s decision be held in abeyance during the interim procedure period and reassessed when the new rules are in place.

The two Republican SEC commissioners, Hester Peirce and Elad Roisman, said the move effectively nullifies duly established rules without going through the standard rule-changing procedure or soliciting public input.

”Abandonment of duly-adopted rules without notice and request for comment raises the prospect that the rules that the Commission adopts in compliance with the Administrative Procedure Act may be interim at best, and transitory at worst,” Peirce and Roisman wrote in their Aug. 5 statement. “This reduces the certainty of the law, a consequence that does not bode well for the Commission or those it regulates.”

In his first few months on the job, Gensler has had high praise for the agency’s whistleblower award program.

“I believe deeply in whistleblower programs and look forward to building on the work of past chairs to ensure the continued strength of the SEC’s program,” he said in prepared remarks for “National Whistleblower Appreciation Day” on July 30.

Gensler said in the same speech he has asked SEC staff to make recommendations on how the agency can strengthen its whistleblower program, as well as reduce the processing time for a payout to be made to deserving whistleblowers.

For his part, Clayton was also a strong advocate for the SEC whistleblower program, saying in 2019 as he was defending the then-proposed changes: ”Personally … I think the program has been extremely beneficial to investors, and I support it.”

Editor’s note: This story was updated Aug. 9 to reflect the SEC’s interim procedure while the rule changes are under review.

Aaron Nicodemus covers regulatory policy and compliance trends for Compliance Week. He previously worked as a reporter for Bloomberg Law and as business editor at the Telegram & Gazette in Worcester, Mass.

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