On August 12, 2011, the Securities and Exchange Commission's (the "Commission") final rules governing its whistleblower protection program (the "Whistleblower Program") became effective. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the Commission was given authority to provide financial rewards for individuals who provide "new and timely" information about securities laws violations, where such information leads to a successful securities law enforcement action with monetary sanctions totaling more than $1 million. The Commission adopted the final rules governing the Whistleblower Program on May 25, 2011. Under these rules, any individual seeking a reward for providing information regarding a securities law violation must submit a completed online questionnaire or a Form-TCR.
In connection with the launch of the Whistleblower Program, the Commission has created a webpage devoted to the Office of the Whistleblower (the "Whistleblower Website"). The website, available at http://www.sec.gov/whistleblower, provides users with two methods for submitting tips regarding securities laws violations. The Whistleblower Website provides an online questionnaire, which allows a potential whistleblower to answer questions provided online regarding the whistleblower's complaint and submit such information directly to the Commission's Whistleblower Program. Additionally, the Whistleblower Website makes available an electronic version of the Form-TCR, which potential whistleblowers can download and complete. Completed Form-TCRs may be submitted to the Commission's Whistleblower Program either by mail or fax. In the Commission's adopting release of the final rules for the Whistleblower Program, the Commission estimated that it would receive 30,000 whistleblower tips per year. Of these 30,000 tips, the Commission estimated that about 3,000 would be through Form-TCRs.
In addition to providing the avenues for providing information to the Whistleblower Program, the Whistleblower Website devotes a page to claiming rewards. As noted above, whistleblowers who submitted new and timely information regarding a securities law violation that ultimately results in the imposition of sanctions exceeding $1 million may be entitled to a reward under the Whistleblower Program. The Commission holds the discretionary authority to determine the ultimate amount of the reward provided to the whistleblower, with such rewards to range between 10 to 30 percent of the total amount of monetary sanctions imposed. The Whistleblower Website provides a list of "Notices of Covered Actions" - that is, a list of actions occurring after July 21, 2010, in which the final judgment involved sanctions (by itself or combined with prior judgments) exceeding $1 million. Persons seeking to claim a reward for providing the new and timely information that led to an action disclosed on the Whistleblower Website must complete and submit a Form WB-APP (also provided on the Whistleblower Website) to the Office of the Whistleblower by midnight by the "claim due date" listed with notice of the action.
Finally, as noted in last week's "Financial Services Update," the Commodity Futures Trading Commission also finalized whistleblower rules that largely mirror the Commission's newly lose-effective whistleblower rules.