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Economy 4.0

Tell the SEC What to Do With Whistleblowers

Stan Alcorn Dec 17, 2010

Do you have strong feelings about how the Security and Exchange Commission defines “Major Security-Based Swap Participant”?

Do you want to tell the Commodity Futures Trading Commission how to treat “Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy”?

No? Well how would you like to read the opinions, informed and otherwise, of people who do (or think they do)?

Regulatory agencies have been posting rules at an impressive clip as they give detailed form to the vaguer provisions of the Dodd-Frank financial regulatory reform bill. Thanks to a newfound commitment to transparency, the websites of the SEC, CFTC, Federal Reserve and the Federal Deposit Insurance Corporation feature both public comments on those rules and (long) lists of lobbyists’ meeting with regulators. (Not surprisingly, as of two weeks ago, 90% of those offering their wisdom were in or deeply connected to the financial industry.)

Take, for example, the SEC’s new provisions to protect whistleblowers, which offer new protections and rewards for those who report financial wrongdoing. Here’s an excerpt from the comments of William Wilson of Americans for Limited Government (PDF):

As put by Jacob Frenkel, a former Commission enforcement lawyer, the proposed whistleblower program, “reverse[s] a decade of effort promoting integrity, self­ remediation, and corporate self-reporting.” What Commissioner Frenkel is referring to used to be called, “The American Way.”

Other commenters take a different view of the decade that began with Enron and ended with the Great Recession; Some 848 individuals wrote in with the following objection to the prospect of forcing employees to go to their employers before snitching to regulators:

“More whistleblowing about corporate malfeasance could have made the foreclosure crisis and economic meltdown less severe. Whistleblowers should never be forced or encouraged to take their concerns to their potentially corrupt bosses first: Those who go directly to the government deserve the strongest rewards and protections allowed by law.”

You can leave comments of your own, but hurry! Today, Friday, December 17 is the last day for this rule. (The SEC will consider these comments as they write the final version in the coming months)

And if all this talk of whistleblowing still seems like hot air, never fear: Economy 4.0 special correspondent David Brancaccio breaks down the Dodd-Frank provisions, and what the SEC’s version means for financial reform, on today’s episode of Marketplace.

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