The SEC Adopts Final Whistleblower Incentive and Protection Rules and Forms

Yesterday, by a vote of 3-2, the Securities and Exchange Commission approved a final set of rules and forms to implement the Whistleblower Incentive and Protection Program added in Section 21F of the Securities Exchange Act by Section 922 of the Dodd-Frank Act.

The purpose of the whistleblower program is to award incentives and afford protections to individuals who provide the Commission with high-quality tips leading to successful enforcement actions. To be eligible for an award, a person must provide original information that leads to a successful administrative or federal enforcement action in which the Commission obtains monetary sanctions in excess of $1 million.

The adopting release, weighing in at 305 pages, is available here, and the rules and forms will be effective 60 days after their publication in the federal register (which is good, because it’s going to take me that long to read them).

In the meantime, as was noted in the Commission’s open meeting yesterday morning, the final rule and forms that were adopted do differ from the proposed rules and forms in some material respects. Comparatively, they seek to strike a more appropriate balance between concerns that the Commission’s whistleblower program will undermine companies’ own internal compliance efforts and the intent of Section 922 in incentivizing would-be whistleblowers to report potential securities law violations. I’ll have more on this after I actually finish reading the rules.

Of course, these final rules and forms really only mark the beginning of the whistleblower program and the Commission’s newly implemented Office of the Whistleblower.  And, even now, there are still efforts underway to amend the Dodd-Frank Act’s whistleblower requirements.