SEC’s Whistleblower Rules Are Now Effective



On May 25, 2011, the Securities and Exchange Commission (“SEC”) adopted final rules implementing the whistleblower provisions of the Dodd-Frank financial reform regulations, which provide that individuals who report potential securities violations to the SEC may be entitled to a reward of between 10 and 30 percent of any monetary recovery exceeding $1 million. This program affects every public company. Effective August 12, 2011

The new whistleblower program became effective on August 12, 2011.

As of that date, the SEC’s whistleblower website* provides a link with regard to submitting information to the SEC, to submitting a claim for an award under the program and procedures and considerations in connection with assessing award claims.

The program presents challenges to public companies that have spent considerable effort and resources on strengthening their internal compliance and reporting systems in response to the Sarbanes-Oxley Act. In addition, with the SEC imposing ever-larger civil penalties in enforcement actions, especially in anti-bribery Foreign Corrupt Practices Act enforcement actions and because of the massive scale of settlements that the SEC has been achieving in this area, the whistleblower provisions provide powerful incentives to employees to bypass or completely ignore internal compliance procedures.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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