Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, delivered the following opening statement today at a subcommittee hearing to review legislative proposals to improve the whistleblower provisions included in Dodd-Frank:
"Good afternoon. I want to thank our panel of witnesses for joining us today to offer their thoughts and input on the whistleblower provisions of the Dodd-Frank Act, as well as the SEC's proposed rulemaking to implement these provisions.
"It is appropriate that we convene this hearing today to have a discussion about the whistleblower provisions -- appropriate in a "better late than never' kind of way.
"What would have been more appropriate is if this subcommittee and the full House Financial Services Committee had a robust discussion about potential adjustments to the SEC whistleblower program before these provisions were signed into law.
"Unfortunately, too much of Dodd-Frank was implemented in this way. Rushed to meet a political deadline. Passed to check off long-standing agendas of certain constituencies, rather than to address issues that actually contributed to the cause of the financial crisis. Not enough thoughtful analysis on what unintended consequences might arise from certain policies.
"The goal of providing an environment where whistleblowers can be most effective in helping to right wrongs and where they have proper safeguards is a laudable one. The details of writing into law the proper incentives and rules to create such an environment, however, are very important, as well.
"We must be careful not to do more harm than good.
"Several of our witnesses here today, as well as scores of others who have participated in the comment letter process to the SEC, have raised concerns about the unintended consequences of the Dodd-Frank whistleblower rules.
"Foremost among those concerns: Will the incentive structure created by the Dodd-Frank provisions exacerbate violations by encouraging them to fester and become more serious problems? Does the legislation and the proposed rulemaking allow those complicit in violations to not only escape punishment, but potentially receive massive rewards in spite of their malfeasance?
"If internal compliance programs are bypassed, isn't good corporate citizenship discouraged, and won't there be a greater likelihood that companies will have less accurate financial statements and that companies will need to restate those financials upon which investors had already relied?
"I am pleased that one of our freshmen members, Congressman Michael Grimm, has put forward a discussion draft of legislative proposals meant to address some of these concerns. Having this proposal in front of the subcommittee today will enhance the discussion and lead to a more positive outcome to the efforts of this Congress and the SEC to address whistleblower issues.
"Once again, I thank our witnesses for their testimony and look forward to today's discussion."