In September 2020, after a lengthy notice-and-comment period and two years of careful consideration, the Commission amended its whistleblower rules for the first time since they were adopted in 2011.[1] I supported the amendments because they drew from a decade of experience with the whistleblower program and were calibrated to balance efficient administration of our effective whistleblower program with the program’s overarching goal of providing incentives for individuals to report, sometimes at great risk to their careers, violations of the federal securities.[2] Yet in June 2021, a spare seven months after the 2020 Amendments became effective, the whistleblower rules returned to the Chair’s regulatory agenda, notwithstanding the fact that there appeared to be no new information that merited revisiting the recently amended rules.[3] Two months later, over my objection, the Commission published a “policy statement” that, in response to a legal challenge to certain of the 2020 rule amendments, effectively nullified the challenged provisions.[4]

I cannot support today’s proposed amendments. Absent some pressing need to remedy inadvertent oversights, address unanticipated consequences, or deal with significant new factual developments, revisiting recently adopted rules subverts the regulatory consistency and certainty essential to well-functioning markets. As was observed nearly 250 years ago, often “it is of more consequence that a rule should be certain, than whether the rule is established one way or the other.”[5] The markets we regulate are best served when, consistent with the principles of the Administrative Procedure Act, we engage in thoughtful, measured rule-making, and then adhere to the results of that process. Abandoning recently adopted rules simply because they have been challenged in court both thwarts our rule-making process and risks the perception that our duly adopted rules are provisional, subject to further revision if one really, really objects.

When one reads the proposal, it becomes apparent that, as then-Commissioner Roisman and I observed in June 2021, there is no new information that compels reopening the recently adopted rules. In fact, as the proposal acknowledges, the whistleblower program in the past fiscal year received the most tips it has ever received in a given year, awarded more money to whistleblowers than it has ever awarded in a given year (including some of the largest single awards in the program’s history), and made more awards than in all its previous years combined.[6] These facts indicate that the program’s rules, as amended in 2020, are functioning well, not that they are in need of further revision.

Nonetheless, the proposal contends that Rule 21F-3(b) needs amendment because the Commission has learned of “a number” of applications for related action awards that may (or may not) “implicate” other award programs that offer less generous payouts, either because the other programs have statutory award caps lower than the cap applicable to the Commission’s program or because the award is entirely discretionary.[7] But the Commission plainly was aware of other potentially relevant award programs—and of FIRREA and its award cap in particular—when it adopted the 2020 Amendments, so the possibility that a claimant might be left to make a claim under a less generous award program was known and considered at that time.[8]

The 2020 amendments to Rule 21F-3(b) were explicitly “based on the Commission’s experience and past practice” and “codifie[d] the approach the Commission has previously taken where another award program is available in connection with an action for which a related-action award is sought.”[9] It seems highly improbable that the Commission, in the ten-year period of the whistleblower program that preceded the 2020 Amendments, had no experience dealing with related award applications that implicated other whistleblower programs with less generous award provisions. Additionally, the failure to identify the number of pending related action award applications that may “implicate” other award programs renders it difficult to assess the scope of the issue and to conduct a reasonable analysis of the costs and benefits of applying the existing rule versus the proposed amendments to such pending applications. The economic analysis admits as much, acknowledging that “the benefits and costs” of the proposals “are difficult to quantify.”[10]

The proposal also asserts that Rule 21F-6 should be amended to provide that the Commission will use its statutory discretion to consider the dollar amount of an award only to increase an award, and that it “shall not” consider dollar amounts when determining whether to decrease an award.[11] The proposal offers three reasons for this amendment: (1) the Commission has not considered dollar amounts to lower an award since the 2020 Amendments were adopted; (2) large awards generate publicity, which in turn might increase reporting by whistleblowers; and (3) “the Commission perceives a risk that merely maintaining the authority to lower awards based on dollar amounts of the award may create the misimpression that the Commission is exercising such authority frequently—and this could in turn potentially deter individuals from reporting misconduct.”[12] These reasons are not compelling.

The first reason, simply stated, is that we do not need it because we have not used it; however, that we have not used our discretion to consider dollar amounts when lowering an award also is reasonably understood as evidence that we have not abused our discretion by misapplying it to lower awards. Discretion exists so officials can exercise it when appropriate facts arise; that those facts have not yet arisen is no guarantee that they never will arise. The second reason is an unremarkable truism: large awards generate publicity for the program, which in turn leads to potential increased reporting from whistleblowers. Nothing in that reasoning chain explains why the Commission should disavow part of its statutory discretion to set award amounts appropriate to the facts and circumstances of the case. Moreover, as already noted, the Commission issued some of the largest awards in the program’s history in the past fiscal year, and there is no evidence that the mere possibility that we might have considered dollar amounts in determining those awards diminished the programmatic value of the publicity they generated.

The third reason appears to be the operative one, but it is no more persuasive than the first two. The Commission has other options to ameliorate the purported “misimpression” that it frequently exercises its discretion to consider dollar amounts as a reason to lower an award. We could issue guidance explaining when and how we typically will use discretion to consider dollar amounts when determining award amounts. We also could state in the final award determination that we considered, or did not consider, the dollar amount in setting the award amount. Indeed, one presumes that the Commission could and should explain itself if and when it exercises its discretion to consider dollar amounts in its determination to increase an award. That the Commission historically has not done so does not mean that it is precluded from doing so when necessary. The proposal offers no compelling reasons why the Commission could not both protect the identity of the claimant and offer a concise explanation of how and why it considered dollar amounts when determining a particular award amount.

In sum, this proposal is a solution in search of a problem. Given the demanding rulemaking agenda on which the Commission and its staff have embarked in recent months, this unnecessary and unpersuasive proposal to revisit the recently adopted amendments to the whistleblower rules is an imprudent use of our resources. I thank the staff for their work on this proposal amidst the many others on their plates and thank the commenters in advance for their thoughts on the proposal. I respectfully dissent.[13]