Small Business Securities Bulletin: SEC Adopts Rules Implementing the Whistleblower Provisions of Dodd-Frank


On May 25, 2011, the Securities and Exchange Commission (SEC) adopted rules to implement the whistleblower and anti-retaliation provisions of Section 21F of the Securities Exchange Act of 1934, which was added by Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd- Frank). Consistent with Dodd-Frank and the proposed rules, the final rules provide that individuals who voluntarily provide the SEC with original information relating to a possible violation of federal securities laws in accordance with procedures established in the final rules, which leads to the successful enforcement by the SEC of a federal court or administrative action in which it obtains monetary sanctions totaling more than $1 million, are entitled to an award equal to between 10% and 30% of the amount collected. Smaller actions arising from the same “nucleus of operative facts” will be aggregated for purpose of reaching the $1 million threshold and determining an award and, consistent with the proposed rules, the SEC may also pay an award based on amounts collected in certain related actions. The SEC will determine the percentage amount of an award based on factors enumerated in the rules and the adopting release.

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