The Securities and Exchange Commission voted today to approve new regulations that will provide significant financial rewards to whistleblowers who report substantive original tips leading to enforcement actions. The regulations were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. When the regulations were proposed, the extent to which whistleblowers will be required to first report problems internally was a significant point of contention. The SEC made certain changes to the regulations to encourage internal reporting but stopped short of requiring it. Some of these changes include: (1) making a whistleblower eligible for a reward if he or she reports the wrongdoing to the company and the company then reports it to the SEC; (2) allowing the whistleblower to be treated as part of the whistleblower program from the date of internal reporting, as long as a report to the SEC follows within 120 days; and (3) providing potentially higher rewards for whistleblowers who first report internally. The regulations describe the procedures for submitting information to the SEC and for making a claim. The regulations also provide anti-retaliation protection in situations where the whistleblower possesses a reasonable belief that the information provided to the SEC relates to a possible securities law violation. In addition, under the regulations it is unlawful for anyone to interfere with the whistleblower's efforts to communicate with the SEC.
In the coming days we will provide a more detailed analysis of the final regulations, their likely impact, and steps to take to address these issues in compliance policies and procedures.
The SEC regulations will be effective 60 days after they are submitted to Congress or published in the Federal Register.
For a copy of the SEC's release "Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934," please click on www.sec.gov/rules/final/2011/34-64545.pdf.