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.