The SEC hands out millions of dollars each year to individuals who alert the Commission (or sometimes other regulatory agencies) of ultimately proven securities fraud.  During the Trump years, the Commission underwent formal procedures under the Administrative Procedures Act (“APA”) to limit these awards in two regards: to give discretion to the SEC to reduce the formula pay-outs in very large cases, and to decline to provide pay-outs where other agencies have similar whistleblower payment programs.

The new Democratic majority intends to reverse these limitations, but also has this week announced that in the interim they will ignore the rules revisions.  This announcement has been criticized by the two remaining Trump-appointed (and now minority) Commissioners as bad policy, creating uncertainty and the precedent that the marketplace can no longer rely on formally adopted rules as governing regulatory action.

However correct that the majority may be, in claiming that the Trump era changes weakened the attractiveness of blowing the whistle against wrongdoing, the dissenting Trump Commissioners seen correct in their criticism.  The APA process for rulemaking is statutory, robust and designed to create knowable, actionable and clear guidance.  Politics aside, seems to me that “the law is the law.”  The SEC always has been politicized at its core, at least at the Commissioner level, where the party in the White House names 3 of the 5 members; but the job of the staff is to enforce what’s on the books today, not what the majority party intends to do in the future.

The professional qualifications of the minority Commissioners are excellent, and so is their argument against the recent policy statement abandoning the law.

Finally, although I readily confess that there is no substantive link between the above legal observations and famous lines by Lauren Bacall in the classic film To Have and Have Not.  I confess that every time “whistleblowing” arises in a professional context, those lines spring inappropriately to mind: “If you want me, all you have to do is whistle. … You know how to whistle, don’t you, Harry?  You just put your lips together and blow.”