In a letter to SEC Chair Mary Schapiro, Senator Charles Grassley (R-Iowa) asked the Commission to detail its procedures regarding the protection of sensitive whistleblower information, including any written guidance given to SEC staff. Under the SEC’s current policies and procedures, he queried, would the SEC have the power to discipline a staff member who showed the target of an investigation identifiable handwriting from a cooperating source and, if not, why not. Relatedly, the Senator asks if handwriting is specifically covered under the SEC’s training procedures. The Senator also wants to know if the SEC considers handwriting to be information which could betray a whistleblower’s identity, and if so why, and if not, why not. More broadly, he wants to know how SEC are staff trained to ensure that they do not disclose confidential information. Chairman Schapiro’s response is asked for by May 9.
The Senator’s letter to the SEC was prompted by a contact from a whistleblower at a private firm who gave information to the SEC. According to Senator Grassley, this whistleblower provided contemporaneously recorded handwritten notebooks to the SEC. According to reporting by the Wall Street Journal, after giving the notebooks to SEC staff, staff members took the notebooks and used them to question suspects without making any attempt to conceal the whistleblower’s handwriting. As a result, wrote the Senator, the SEC staff compromised this whistleblower’s identity. Subsequently, the whistleblower was fired and has had difficulty finding employment in the securities industry as a result.
Noting that whistleblowers are essential to root out fraud and malfeasance, Senator Grassley expressed concern that the SEC may not be properly protecting the identity of whistleblowers and others who come to the SEC with information on securities law violations. To help ensure that the SEC is following appropriate procedures to protect the identity of whistleblowers and informants, he asks that the questions he posed be answered.
As a long-time advocate for whistleblowers within the federal government, Senator Grassley knows that it is essential to protect their identity when they choose to make confidential disclosures. Because retaliation for protected disclosures can be subtle and take many forms, he noted, confidentiality can sometimes be the most effective protection. He emphasized that exposing a confidential whistleblower can lead to employer retribution and chill the environment for future whistleblowers to come forward. That is why, for example, Congress provided a mechanism for federal employees to make disclosures to the Office of Special Counsel and protected the confidentiality of such disclosures by statute.