On May 25, 2011, the Securities and Exchange Commission (SEC) adopted final rules implementing the controversial “whistleblower” provisions of the Dodd-Frank Act, which provide for the payment of monetary awards to individuals who report possible violations of the federal securities laws to the SEC. Under Section 922 of the Dodd-Frank Act, if a whistleblower provides original information to the SEC that results in a fine of more than $1 million, he or she may receive between 10 and 30% of such fine.
One of the more controversial aspects of the new rules is the SEC’s rejection of strenuous comments from the business community requesting that whistleblowers be required to report their information through a company’s internal compliance procedures prior to making a report to the SEC. The SEC did, however, make some adjustments in the final rules to incentivize whistleblowers to use internal compliance processes before making a whistleblower submission to the SEC.
The new whistleblower rules and guidance on what companies should do to mitigate whistleblower risks are explored in more detail here (PDF).
