New Dodd-Frank Whistleblower Requirements Approved by SEC

A public company’s “whistleblower” policies and procedures must take into account the potential impact of Section 21F of the Securities Exchange Act of 1934 entitled “Securities Whistleblower Incentives and Protection.”, which was adopted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).  Among other things, Dodd-Frank established a whistleblower program that requires the Securities and Exchange Commission (“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” derived from the independent knowledge or analysis of the whistleblower about a violation of the federal securities laws that leads to the successful enforcement of a covered judicial or administrative action, or a related action.  Dodd-Frank provides for bounties of 10% to 30% of the monetary sanctions exceeding $1 million resulting from an SEC enforcement action, or several enforcement actions rising out of the same set of facts. Dodd-Frank also prohibits retaliation by employers against individuals who provide the SEC with information about possible securities violations.   On May 25, 2011, the SEC voted to approve the Final Rules implementing the whistleblower provisions of Dodd-Frank and this report summarizes some of the key issues that public companies must now take into account in designing their internal procedures relating to employee reporting.

Written by agutterman

Founding Director of the Sustainable Entrepreneurship Project

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