Republicans seek changes to SEC whistleblower rule
U.S. House Republicans are mounting a last-ditch effort to influence a corporate whistleblower rule that companies fear will drive cash-hungry tipsters directly to the government, undermining internal compliance programs.
Experts from the U.S. Chamber of Commerce will be among the witnesses at a hearing Wednesday afternoon into the Securities
and Exchange Commission rule that responds to the whistleblower provisions in last year's Dodd-Frank financial oversight law.
The SEC's proposal would reward people who provide original substantive tips leading to enforcement actions that result in sanctions exceeding $1 million.
The whistleblower reward has become one of the most contentious parts of Dodd-Frank, as companies from Google Inc and Microsoft Corp to General Electric Co and JPMorgan Chase & Co have asked the SEC to change the proposal by requiring whistleblowers to report company problems internally before going to regulators.
Failing to do so, they say, will undermine internal compliance programs because employees will be enticed by the prospect of a reward of between 10 to 30 percent of the total monetary sanctions.
SEC officials told Reuters last week that the agency is not likely to agree to the demands for mandatory internal reporting, and that a vote on the plan could come as early as May 25.
House Republicans are exploring ways to force legislative changes to the whistleblower compensation program.
Representative Michael Grimm has drafted a bill that would amend Dodd-Frank by making internal reporting a requirement before a whistleblower can get a financial reward.
The bill would also change the law so that a whistleblower would not be guaranteed a reward, an effort to address concerns that the law as currently written may lead to an influx of frivolous tips.
Wednesday's panel witnesses mostly support corporate America's position on the whistleblower rule.
A whistleblower may choose not to report internally because he or she believes that the company could then rectify the problem, and therefore be subject to lesser or no monetary sanctions upon which an award would be paid, said Deloitte Deputy CEO Robert Kueppers in prepared testimony.
Only one witness on Wednesday is expected to testify that he is concerned about the changes to the law proposed in Grimm's draft bill.
Geoffrey Rapp, a professor at the University of Toledo College of Law, plans to tell lawmakers that the whistleblower provisions in Dodd-Frank are vital and that whistleblowers are still likely to report wrongdoing internally first anyway because they see themselves as loyal employees.
(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)
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