SEC Whistleblower Act

On July 21, 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. A portion of the Act amended the Securities Exchange Act of 1934, which had included a relatively rudimentary whistleblower act directed at exposing insider training. The SEC adopted Final Rules to implement the Act on May 25, 2011 which went into effect on August 12, 2011. The Act marked a significant increase over its predecessor statute in whistleblower incentives and protections.

Notably, the Dodd-Frank Act and corresponding regulations provide that a whistleblower is entitled to 10% to 30% of any recovery by the SEC that exceeds $1 million. The Act provides that the percentage will be determined by the significance of the whistleblower’s information, the degree of assistance provided by the whistleblower, the “programmatic interest of the Commission in deterring violations of the securities law,” and additional factors established by the Commission. The Act also provides protection against retaliation and allows a whistleblower to bring a private action for reinstatement, back pay and damages if he or she experiences retaliation. Finally, the Act is unique in the level of confidentiality provided – a whistleblower who is represented by counsel may stay anonymous throughout the entire proceedings until the payment of an award.

The complete text of the Dodd-Frank whistleblower provisions can be found here. The SEC Final Rule can be found here.