On Nov. 3, 2010, the U.S. Securities and Exchange Commission proposed regulations to define and implement the controversial whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank, signed into law on July 21, 2010, provides that, under certain circumstances, whistleblowers may receive a portion of the sanctions received by the SEC as a reward. The proposed rules also address the important issues of whether whistleblowers must report suspected violations to their internal compliance departments before making reports to the SEC and how such internal reporting may affect their ability to receive a financial award under the program.
To be considered eligible for an award under Dodd-Frank, a whistleblower must voluntarily provide the SEC with original information about a violation of the federal securities laws that leads to a successful enforcement by the SEC, in a federal court or administrative action, in which the SEC obtains monetary sanctions exceeding $1 million. Section 922 of Dodd-Frank authorizes the SEC to reward individuals with an amount between 10% and 30% of such sanctions, substantially expanding the SEC’s authority to compensate whistleblowers.
