The belated adoption on May 25, 2011 of the U.S. Securities and Exchange Commission’s (“SEC”) long anticipated final whistleblower rules (“Final Rules”) pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)1 has done little to temper the sharply divergent reactions that the initial Proposed Rules evoked.2 As the Commissioners’ divided 3-2 vote in favor of the Rules and public commentary since make clear, opinions remain deeply divided on the propriety, the wisdom, and the legality of the SEC’s approach.

On the single most contentious issue—whether the “bounty” program providing financial incentives for would-be whistleblowers should include an internal reporting requirement — the Final Rules ignore the urging of many parties and does not require individuals to report a suspected securities law violation within a company first in order to benefit from the potential financial rewards. SEC Chairman Mary L. Schapiro expressed the view that the Rules “strike[] the correct balance . . . between encouraging whistleblowers to pursue the route of internal compliance when appropriate . . . [and] providing them the option of heading directly to the SEC.”3

The U.S. Chamber of Commerce, for one, is not persuaded.4 A leading critic of both the Proposed Rules and the Final Rules, the Chamber criticized the approach of “not requiring simultaneous reporting to both the company and the SEC” (which it claims “prevents quick action to investigate and solve problems if they exist”), and colorfully analogized the idea of “[n]ot informing the company of a potential fraud and waiting for the SEC to act” to “not calling the firefighters down the street to put out a raging fire and . . . calling the lawyers from the next town to sue over the fire instead.”5

It is hardly a foregone conclusion that the Rules will take effect in their current form, as the legality of SEC rulemaking pursuant to Dodd-Frank has already elicited significant legal challenges on a number of fronts, including challenges in which our firm has participated.6 In the event the Rules do take effect substantially in their current form, however, we offer below a preliminary assessment of their key provisios and implications, so that corporations may be prepared whether it is ultimately “firefighters” or lawyers who come calling.