September 29, 2020

SEC adopts amendments to whistleblower rules

On September 23, 2020, the US Securities and Exchange Commission adopted amendments to the whistleblower program rules, originally promulgated in 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The SEC also published guidance about the awards determination process.

The amendments are intended to provide clarity to whistleblowers, efficiency in processing whistleblower claims, and transparency regarding the SEC’s calculation of whistleblower awards.  The changes include a presumption that, in cases where the anticipated whistleblower award is $5 million or less, the whistleblower will receive the maximum statutory award amount.  The amendments also establish that whistleblower awards shall be determined exclusively based on the application of the award factors enumerated in the whistleblower rules, without the possibility of additional considerations regarding the size the award.  The amendments specify the circumstances under which the SEC may waive compliance with the requirement that whistleblowers first submit their information to the SEC on Form TCR, and clarify that the form of the resolution of an action, such as a deferred prosecution agreement, non-prosecution agreement, or settlement agreement, will not affect whether the whistleblower will qualify for a whistleblower award.  The SEC did not adopt discretionary caps on large whistleblower awards, which had been part of the proposed changes to the whistleblower rules.  The amendments to the whistleblower rules will become effective thirty days after publication in the Federal Register.

According to SEC data, information provided by whistleblowers has resulted in over $2.5 billion in “financial remedies” to date, and the whistleblower program has awarded approximately $525 million to about 100 individuals.

During the same week that the SEC finalized these rule changes, the agency announced three additional whistleblower awards.  On September 17, 2020, the SEC awarded $250,000 to joint whistleblowers whose tip caused the SEC to initiate an investigation that resulted in a successful enforcement action.  The award announcement also stated that one of the claimants had first internally reported his/her concerns to the company. 

On September 25, 2020, the SEC announced the award of $1.8 million to an individual whose tip, reported first internally and later to the SEC, revealed misconduct overseas that would otherwise have been difficult to detect.  On the same day, the SEC also announced a $750,000 award to a second whistleblower who reported securities violations that took place overseas.

SEC press release | Final Rule | Interpretive Guidance |

SEC order ($250,000) | SEC order ($1.8 million)  | SEC order ($750,000) |