There has been a lot of talk recently regarding the new "whistleblower"
provisions included in this summer's Dodd-Frank Wall Street Reform
and Consumer Protection Act. Basically, Section 922 of the Act amends
the whistleblower program established in The Securities Exchange Act of
1934 and gives the SEC the new authority to financially award whistleblowers
who provide information to the Commission that results in a successful
action. The information must be provided voluntarily and the whistleblower
must meet eligibility requirements.
The monetary award applies in actions resulting in monetary sanctions
over $1 million. The award must be between 10 and 30 percent of the total
sanctions collected in the action, though the SEC retains the authority
to decide exactly what percentage will be awarded.
To be eligible for the award, the whistleblower cannot be convicted for
having had a role in the crime, cannot have learned of the information
"through the performance of an audit of financial statements required
under the securities laws," and the information provided must be
completely new to the SEC. This means that the Commission cannot have
known about the information from any other source, including: hearings,
governmental reports and/or investigations, or the news media.
Section 922 also prohibits company retaliation against whistleblowers
and provides whistleblowers with new protections against retaliation.
If - despite the protections - a whistleblower is concerned about providing
information to the SEC, it is possible to provide the information anonymously
through an attorney and still remain eligible for the award.
The new regulations must go into effect no later than April 21, 2011.
Information provided to the SEC regarding criminal conduct that occurred
prior to July 21, 2010 (the date the Act was signed into law) may still
qualify for the award, if the information results in a successful enforcement action.