The SEC recently adopted rules to support the whistleblower program, implemented under Section 922 of the Dodd-Frank Act, that rewards individuals who voluntarily provide the agency with original information that leads to successful enforcement actions.  The program includes the SEC's new webpage for people to report a violation of the federal securities laws and apply for a financial award at reporting is not required for the whistleblower to obtain a reward, which may be between 10-30% of the penalties levied. 

General Description of the Whistleblower Rules:

To be considered for an award, generally the rules require that a whistleblower must:

  • Voluntarily provide the information to the SEC before the government asks for it directly from the whistleblower.
  • Provides original information based upon the whistleblower's independent knowledge or independent analysis, not already known to the Commission and not derived exclusively from certain public sources.
  • That leads to the successful enforcement by the SEC of a federal court or administrative action.  A whistleblower's information can be deemed to have led to a successful enforcement action if, among other ways, the information is sufficiently specific, credible and timely to cause the Commission to open a new examination or investigation, reopen a closed investigation, open a new line of inquiry in an existing examination or investigation, or significantly contributes to the success of an action if the conduct was already under investigation when the information was submitted.
  • In which the monetary sanctions collected in actions brought by the SEC and related actions  brought by other regulatory and law enforcement authorities exceed $1 million. 
  • The Act also provides a means for submitting tips anonymously through an attorney. 

Prohibition Against Retaliation and Private Right of Action:

The Dodd-Frank Act also creates a private right of action for whistleblowers who have suffered retaliation related to certain whistleblower activities.  Remedies for the person bringing the private action may include reinstatement, double back pay with interest, litigation costs, and attorney's fees.  In contrast to Sarbanes-Oxley, a plaintiff need not exhaust his administrative remedies before bringing a claim in federal court. 

Other provisions of Dodd-Frank increase protections for whistleblowers in the financial services industry, expand protections under the False Claims Act and provide protection for whistleblowing to the Commodities Futures Trading Commission.