By Stephen M. Kohn and Geoff Schweller

Since it was established in 2010, the U.S. Securities and Exchange Commission (SEC) Whistleblower Program has emerged as the gold standard for whistleblower award programs. Through a combination of anonymous reporting channels, anti-retaliation protections, transnational reach, and mandatory whistleblower awards, the program has generated tens of thousands of tips, resulted in the collection of over $6 billion in sanctions from fraudsters and the return of over $1.3 billion directly to harmed investors.

The program has garnered praise from SEC officials regardless of political affiliation. Jay Clayton, the SEC Chair during the first Trump administration described it as “a critical component of the Commission’s efforts to detect wrongdoing and protect investors and the marketplace, particularly where fraud is well-hidden or difficult to detect.” Gary Gensler, the SEC Chair under Biden, noted that program “has greatly aided the Commission’s work to protect investors.”

While the program has been an immense success, it is not without its flaws, and a newly introduced bipartisan bill seeks to address these issues so that the SEC Whistleblower Program can continue to thrive.

On March 26, Senators Chuck Grassley (R-IA) and Elizabeth Warren (D-MA) introduced the SEC Whistleblower Reform Act of 2025 which offers three common sense reforms to issues plaguing the problem, including lengthy delays in whistleblower award processing and the lack of anti-retaliation protections for internal whistleblowers. This bipartisan legislation recognizes the importance of the SEC Whistleblower Program and seeks to strengthen the program for the years ahead.

Protecting Internal Whistleblowers  

The first reform in the SEC Whistleblower Reform Act is the extension of the Dodd-Frank Act’s anti-retaliation protections to internal whistleblowers. As with any whistleblower program, anti-retaliation protections are a core component of the SEC Whistleblower Program. Under the Dodd-Frank Act, SEC whistleblowers who face retaliation are able to pursue relief in federal court, including reinstatement, double back pay and attorneys’ fees.

However, in the 2018 case Digital Realty Trust, Inc. v. Somers, the Supreme Court ruled that these protections are only afforded to whistleblowers who make their disclosures directly to the SEC, not to those whistleblowers who make a discourse internally.

The lack of protections for internal whistleblowers created by Digital Realty has harmed whistleblowers, the SEC Whistleblower Program, and internal compliance programs. A vast majority of whistleblowers first seek to blow the whistle internally and these whistleblowers are far more likely to face retaliation. In fact, a 2024 paper found that internal whistleblowers constitute over 90% of corporate retaliation cases.

Thus, a large number of whistleblowers are left unprotected by the SEC Whistleblower Program, even if their internal tip leads to a SEC investigation and enforcement action. This absence of protections runs directly counter to the SEC Whistleblower Program’s efforts to promote internal whistleblowing. It is a dangerous paradox that in award determinations the SEC will positively consider the fact that a whistleblower made a tip internally while these sorts of disclosures are not covered.

At the same time, the lack of protections for internal whistleblowers creates an incentive for employees to completely side-step internal compliance and instead go directly to the SEC. This in turn, weakens the capabilities of internal compliance programs.

The SEC Whistleblower Reform Act makes a simple fix to the problems created by the Digital Realty ruling. Under the bill, the term “whistleblower” is clarified to include whistleblowers who make disclosures about potential securities law violations to “a person with supervisory authority over the whistleblower at the employer of the whistleblower,” ensuring that these internal whistleblowers are covered under the Dodd-Frank Act’s anti-retaliation protections.

Addressing Delays in Award Payments

The second reform found in the SEC Whistleblower Reform Act addresses delays in the processing of whistleblower award claims. While the agency has made improvements in recent years, award determinations can still drag on for years. The promise of prompt award determinations are a necessary incentive for whistleblowers to risk their livelihoods disclosing high-level fraud.   

The bill creates a reasonable time limit for the SEC to make preliminary decisions on award claims. It gives the agency considerable discretion but sets an initial goal of 1 year for the preliminary determination. This 1-year timeframe will help reassure would-be-whistleblowers that awards claims will be handled in a timely manner.

By granting the Director of the Division of Enforcement the ability to extend the deadline in cases where the claim “is sufficiently complex or involves more than 1 whistleblower, or if other good cause exists,” the bills strikes an appropriate balance between allowing the agency to sort through complex claim and holding the agency accountable to timely processing claims.

Prohibiting Restrictive NDAs and Mandatory Arbitration

The third and final reform of the SEC Whistleblower Reform Act codifies a ban of non-disclosure agreements and other agreements which prohibit employees from engaging in activity protected under Dodd-Frank and also prohibits mandatory arbitration of Dodd-Frank anti-retaliation cases.

Non-disclosure agreements are a common tool used by employers looking to muzzle would-be-whistleblowers. In recent years, the agency has aggressively filed a number of enforcement actions against companies for their restrictive non-disclosure agreements under SEC Rule 21F-17(a). This bill further clarifies that rights and remedies afforded to whistleblowers through the SEC Whistleblower Program “may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement.”

The prohibition of mandatory arbitration is another key provision of the Act which takes aim at companies’ attempts to undermine the whistleblower program.

Conclusion

The bipartisan support for the SEC Whistleblower Reform Act mirrors the bipartisan support for the SEC Whistleblower Program. The three reforms found in the bill, while minor and technical, make much-needed improvements to the program, further strengthening so it can continue to play a central role in the Commission’s work of protecting investors, ensuring the integrity of the market, and holding fraudsters accountable.

In 2023, former SEC Commissioner Allison Herren Lee, now Of Counsel at Kohn, Kohn & Colapinto, advocated for the passage of a previous version of the SEC Whistleblower Reform Act, writing:

The SEC Whistleblower Reform Act reflects a bipartisan consensus that a strong whistleblower program benefits investors, companies and the public.  The program has helped uncover — and remediate –serious and costly frauds that might never have otherwise come to light. Having worked in law enforcement for over a decade, and then as an SEC Commissioner helping to oversee the SEC’s Office of the Whistleblower, I know firsthand the value of continued investment in this highly successful program.  I hope Congress will act quickly to pass this important legislation.

 Stephen M. Kohn is a Founding Partner and Geoff Schweller the Communications Director of Kohn, Kohn & Colapinto LLP. This post first appeared on the firm’s blog.

The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).