WASHINGTON--(BUSINESS WIRE)--The U.S. Securities and Exchange Commission has announced that it will review controversial whistleblower rules passed in September 2020 and suspend enforcement of two contested rules while it considers revising those rules. The Commission’s actions come after Jordan A. Thomas, a former SEC assistant director, had sued the Commission to vacate these illegal rule changes that undermine the integrity and effectiveness of the SEC Whistleblower Program—a program that he had a leadership role in developing.
“These controversial whistleblower rules were Chairman Clayton’s parting gift to Wall Street—his former and future employers,” said Thomas. “Fortunately, Chairman Gensler is the new sheriff on Wall Street and he is taking concrete steps to remove the poison pills inserted into this critical investor protection program by his predecessor.”
On September 23, 2020, in a 3-2 vote, the Commission approved new rules for its whistleblower program. A broad coalition of SEC Commissioners and anticorruption organizations, along with a bipartisan group of legislators, including Senators Warren and Grassley, publicly opposed the proposed rule changes on legal and policy grounds.
On January 13, 2021, Thomas, now a partner and Chair of the Whistleblower Representation Practice at the law firm of Labaton Sucharow, filed a lawsuit to reverse this contentious rulemaking. Specifically, he challenged the September 2020 amendments to Rule 21F-3(b)(3) (Payment of awards) and 21F-6 (Criteria for determining amount of award).
On April 14, 2021, Chairman Gensler was confirmed by the Senate. Shortly thereafter, under his leadership, the Commission began actively working to address Thomas’ concerns and resolve his lawsuit.
On June 11, 2021, despite objections by other Commissioners, the Commission announced its annual regulatory agenda, which included revisiting the recently adopted amendments to the SEC Whistleblower Program rules.
On August 2, 2021, Chairman Gensler issued a statement informing the public that he had directed his staff to prepare potential revisions to Rule 21F-3(b)(3) and 21F-6—the two amendments challenged by Thomas—for consideration by the Commission later this year.
On August 5, 2021, despite objections by other Commissioners, the Commission issued a statement informing the public that it would effectively suspend enforcement of the two amendments challenged by Thomas while potential revisions are being drafted.
On August 6, 2021, in light of these new developments, Thomas and the Commission filed a joint motion to stay the litigation until February 5, 2022.
“This is a significant victory for courageous SEC whistleblowers and is an important first step toward ensuring that Wall Street helps to rebuild Main Street, rather than harm it,” said Thomas. “With new hope, I have directed my litigation team to stand down and work with the Commission to get the two contested rules right, once and for all.”
In 2011, Thomas established the nation’s first whistleblower practice exclusively focused on violations of the federal securities laws. Both pioneer and recognized leader in the field, he has been profiled in the New York Times and on NPR. His clients have secured precedent-setting whistleblower awards and have launched many of the SEC’s most high-profile cases. To date, his clients have helped the SEC to secure over $1 billion in monetary sanctions and have won the largest single-case SEC whistleblower award in history, more than $83 million. In addition to significant monetary recoveries, among his many landmark cases, he successfully represented the first officer of a public company to win an SEC whistleblower award, the first SEC whistleblower to receive criminal immunity, and the first SEC whistleblower to receive a whistleblower award because his company retaliated against him.