The Chairman of the House Financial Services Committee, Jeb Hensarling, R-Tex., recently issued a memo outlining a plan to implement sweeping changes to a bill he introduced last year known as the Financial CHOICE Act. Hensarling’s five-page memorandum, titled “CHOICE Act 2.0 Changes,” outlines revisions to the draft legislation which could strip significant power from the SEC and sharply impact that agency’s Whistleblower Program.

The most notable proposal would prohibit a co-conspirator from receiving an award under SEC’s Whistleblower Program—a departure from existing law. The SEC’s Whistleblower Program, as originally set forth under the 2010 Dodd-Frank Act, presently forbids the agency from rewarding a whistleblower where that individual was criminally convicted for the same or a similar violation being reported. Current SEC rules also allow the agency to reduce the amount of an award based on a whistleblower’s culpability, but involvement in the reported violation does not altogether preclude eligibility. If passed into law, Hensarling’s proposal would prohibit “co-conspirators” from receiving any reward, which could discourage whistleblower reports. The SEC’s current Whistleblower Program is premised upon the voluntary action of individuals to report securities violations; no award may be received unless the information provided is given “voluntarily.” Under Hensarling’s proposal, individuals peripherally involved in securities violations might think harder about coming forward because financial incentives would be more attenuated.

Hensarling’s memo signals an intent within the GOP to alter the financial regulations promulgated by the Dodd-Frank Act. Time will tell how much of Hensarling’s proposal makes it into the final version of the CHOICE Act, and whether this bill can muster the needed votes to be signed into law. Saul Ewing will track this proposal and update our readers as the legislation develops.