The U.S. Securities and Exchange Commission (“SEC”) has issued final rules (the “Rules”) implementing the whistleblower incentive program (the “Program”) pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which added Section 21F to the Securities Exchange Act of 1934 (the “Exchange Act”).1

The Program is designed to encourage individuals to voluntarily report possible securities law violations to the SEC by offering cash rewards of between 10% and 30% of monetary sanctions exceeding $1 million. It also builds upon the Sarbanes-Oxley Act of 2002 (“SOX”) and provides additional protections to whistleblowers. Dodd-Frank broadens SOX’s anti-retaliation provisions by protecting tipsters of any company subject to the securities laws rather than simply employees of publicly-traded companies, permitting direct causes of action in lieu of administrative hearings, doubling the statute of limitations and increasing possible damages awards.

Many different types of companies are subject to the federal securities laws and must be aware of the Program and its potential effects. Any company subject to the SEC’s jurisdiction may want to consider revisiting its internal reporting and compliance policies and procedures in response to the Program.