This fall, the Securities and Exchange Commission revamped its whistleblower awards program for the first time in 10 years. Those reforms — touching on who is eligible to receive an award for bringing tips to the agency; how large the award might be; and the actual process to submit a tip — went into effect at the beginning of December.
New SEC Whistleblower Rules
Here is how the new rules will effect whistleblowers under the Dodd-Frank Act.
Small awards will be larger. Under the Dodd-Frank Act, when a whistleblower’s tip leads to a monetary penalty of more than $1 million, the whistleblower is eligible for an award of 10 to 30 percent of the settlement amount. The SEC’s new rules say that for any settlement under $5 million, the whistleblower will automatically receive the maximum 30 percent. Historically, approximately 75% of the whistleblower awards by the SEC have fallen into this range, so the new rule will maximize incentives for most whistleblowers.
More enforcement actions will qualify for awards. The new rules clarify which types of regulatory settlements count as “enforcement actions” under the law, where whistleblowers would be eligible for an award. Under the new rules, deferred- and non-prosecution agreements struck with the Justice Department, or settlement agreements struck with the SEC outside the normal civil settlement process will qualify as an “action,” where whistleblowers could then seek their reward.
Written reports are required for protection from retaliation. The new SEC rules clarify that in order for a whistleblower to be protected by the statute's anti-retaliation provision, they must submit information to the SEC in writing. The whistleblower must also make a report to the SEC before they experience retaliation. The new rules do not change existing state law protections for whistleblowers.
Faster disposal of frivolous or defective tips. The SEC also adopted a procedure for summary disposition of certain types of common denials, such as untimely reward applications. People who abuse the program with frivolous tips can also be barred from future participation in the program. (Applicants whose claims are denied or labeled as frivolous would still have a chance to appeal.)
Some large awards may be capped. The reforms clarify that the SEC believes it can cap the size of an award by dollar amount, even if that means the award falls below the 10 percent minimum threshold.
Get in Touch With a SEC Whistleblower Attorney Today
If you are thinking about whether to blow the whistle, you should contact our experienced SEC whistleblower attorneys today. We can guide you in collecting the documents and evidence you need to convince the SEC to take your case and bring an enforcement action against the company you're blowing the whistle on.
We have the unique skills and knowledge to represent SEC whistleblowers. As employment attorneys, we understand your rights at work, and can navigate how to protect you. As former defense-side securities lawyers who were hired to defend these kinds of enforcement actions, we also know the ins and outs of securities laws and can help you and the SEC prove the fraud.