Regulation


The SEC proposed a rule (tinyurl.com/22v5jd5) under the Dodd-Frank Wall Street Reform and Consumer Protection Act to create a whistleblower program that would reward individuals who provide the agency with high-quality tips that lead to successful enforcement actions. The SEC said in a press release that the proposal explains how would-be whistleblowers can qualify for an award through a transparent process that provides them a meaningful opportunity to assert their claim to an award.

 

The SEC proposed the rule pursuant to new section 21F of the Securities Exchange Act, titled “Securities Whistleblower Incentives and Protection.” The new section was added by section 922 of Dodd-Frank. Section 21F directs the SEC to pay awards, subject to certain limitations and conditions, to whistleblowers who voluntarily provide the commission with original information about a violation of the securities laws that leads to a successful enforcement of a federal court or administrative action brought by the commission and results in monetary sanctions exceeding $1 million, and of certain related actions.

 

The SEC’s proposal also asks for comments on whether it should promulgate rules regarding the implementation or interpretation of the anti-retaliation and confidentiality protections contained in section 21F(h) of the Securities Exchange Act.

 

The proposed rule says the SEC will consider higher percentage awards for whistleblowers who first report violations through an employer’s compliance program. The proposal emphasizes that “[c]orporate compliance programs play a role in preventing and detecting securities violations that could harm investors. If these programs are not utilized or working, our system of securities regulation will be less effective.”

 

The comment period closed Dec. 17.

 

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