The Securities and Exchange Commission (the "SEC") has adopted rules pursuant to Section 922 of the Dodd-Frank Act that create significant financial incentives for whistleblower employees to report suspected securities law violations directly to the SEC. These rules have created controversy over whether individuals should be required to report possible violations via a company's internal programs before going to the SEC.
The SEC will pay awards to whistleblowers who voluntarily provide the SEC with original information that leads to a successful SEC enforcement action in which the SEC obtains monetary sanctions in excess of $1 million. The whistleblower award payments may range from 10% to 30% of the total monetary sanctions collected by the SEC. In determining a particular whistleblower award payment, the SEC will consider specific factors that weigh in favor of an increase to such payment, as well as factors weighing in favor of a reduction to the payment.
Sec. Exch. Act Rel. No. 34-64545 (May 25, 2011).