In 2010, as part of the Dodd-Frank Act, Congress created the SEC’s whistleblower program to provide monetary incentives for individuals to come forward and report possible violations of the federal securities laws to the SEC. Under the program, whistleblowers who satisfy certain objective criteria are entitled to an award of between 10 and 30 percent of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities. The SEC’s Office of the Whistleblower has been in operation since mid-2011. Since the program’s inception, the SEC has awarded over $50 million to whistleblowers, including $5.5 million in 2015. In addition to several significant awards to whistleblowers, there have been certain other important developments related to the SEC’s whistleblower program in recent months: 

  • In April (as we reported here), the SEC announced an enforcement action against a company for having overly restrictive language in confidentiality agreements that were being used for witnesses in internal investigation interviews. According to the SEC order, the confidentiality agreements contained language warning these witnesses that they may not disclose the matters discussed during the interview without prior permission from the company’s legal department and that “unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.” The SEC charged the company with violating Rule 21F-17 under the Exchange Act, which prohibits companies from taking any action that would impede potential whistleblowers from reporting violations to the SEC. Although there were no indications that the agreements actually prevented potential whistleblowers from coming forward, the SEC stated that the blanket prohibition against discussing the subject matter of the interviews “has a potential chilling effect on whistleblowers’ willingness to report illegal conduct to the SEC.” 
  • In interpretive guidance released on August 4, 2015, the SEC concluded that anti-retaliation protections cover more than just whistleblowers who report to the SEC. The protections also cover whistleblowers who report wrongdoing internally but who have not reported to the SEC. As discussed below, a September 10, 2015 decision by the Second Circuit defers to the SEC conclusion, but creates a circuit split with the Fifth Circuit.