On November 3, 2010, the SEC proposed rules to implement the new
Dodd-Frank Act whistleblower provisions. Dodd-Frank requires the
SEC to pay an award, under regulations prescribed by the SEC and
subject to certain limitations, to eligible whistleblowers who
voluntarily provide the SEC with original information about a
violation of the securities laws that leads to a successful
enforcement of an action brought by the SEC that results in
monetary sanctions exceeding $1 million and of certain related
actions. Dodd-Frank also prohibits retaliation by employers against
individuals that provide the SEC with information about potential
securities violations. Dodd-Frank substantially expands the SEC's authority to
compensate individuals who provide the SEC with information about
violations of the federal securities laws. Prior to Dodd-Frank, the
SEC's bounty program was limited to insider trading cases and
the amount of an award was capped at 10% of the penalties collected
in the action. The Dodd-Frank Act mandated awards range between 10%
and 30% of penalties, where such sanctions exceed $1 million. Certain people would generally not be considered for
whistleblower awards under the proposed rules. These include: This exclusion – which is intended to prevent company
personnel from "front running" legitimate internal
investigations – ceases to be applicable if the company
does not disclose the information to the SEC within a reasonable
time or acts in bad faith. In these circumstances, such people can
become whistleblowers. The proposed rules include provisions to discourage employees
from bypassing their own company's internal compliance
programs. For instance, the proposed rules: Comments are due on the proposed rules by December 17, 2010. http://www.sec.gov/rules/proposed/2010/34-63237.pdf The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Laurie Green is a Partner in our
Ft Lauderdale office
ARTICLE
18 November 2010
SEC Proposes Whistleblower Rules
On November 3, 2010, the SEC proposed rules to implement the new Dodd-Frank Act whistleblower provisions.