Today — over a month after their scheduled release date — the Securities and Exchange Commission met and adopted in a 3-2 vote the much-anticipated final rules implementing the new whistleblower program established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) enacted in July 2010.1 In adopting the final rules, the SEC “gave a nod” in the direction of providing incentives for individuals to report possible violations of the securities laws first to their employers, rather than — or before reporting to the SEC. However, the final rules continue to provide substantial financial incentives for individuals to report directly to the SEC and bypass a company’s internal compliance process. The new rules will take effect sixty days after their publication in the Federal Register.

The SEC released and sought comment on proposed implementing rules in November 2010.2 According to the SEC, the proposed rules attempted to balance the agency’s desire to maximize the submission of high-quality tips with an acknowledgement that the whistleblower program should not (1) undermine companies’ existing compliance, legal, audit, and similar processes already in place to prevent and resolve misconduct, or (2) invite submissions from compliance personnel or other individuals responsible for preventing and reporting misconduct. Over the last several months, the SEC received more than 240 comment letters and approximately 1,300 letters regarding the proposed rules.