SEC on the Lookout for Whistleblower Restrictions

Whistleblowers are a big deal at the Securities and Exchange Commission, providing critical leads for some of the agency’s biggest cases. For that reason, whistleblower protection is also a big deal at the SEC. Over the last 18 months, the SEC has filed seven whistleblower protection cases alleging efforts by both public and private companies to impede whistleblowers from sharing information with SEC staff. These cases have generated stout fines totaling more than $30 million.The SEC’s whistleblower protection efforts show no signs of slowing. Just this year, for instance, the SEC has brought two cases that push the boundaries of the whistleblower protection rules. In one case, the SEC claimed that a participant in an alleged Ponzi scheme promised investors he would help return their money if they retracted statements previously provided to SEC staff. According to the SEC, this violated SEC Rule 21F-17(a), which prohibits taking “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.” But by the SEC’s own admission, these investors had already communicated with SEC staff. So this seems to be an expansion of the rule’s scope or at least creative application of the rule to…