Yesterday, the Securities and Exchange Commission proposed rules for implementing the whistleblower provisions of the Dodd-Frank Act. That act established a whistleblower program that requires the SEC to pay a bounty to eligible whistleblowers who voluntarily provide the SEC with original information about a violation of the federal securities laws that leads to the successful enforcement of a covered judicial or administrative action, or a related action. This new program is to be subject to rules adopted by the SEC.

Some have criticized the bounty provision of the Dodd-Frank Act as undermining efforts by companies to encourage internal reporting. Doubtless reacting to this criticism, the SEC claims that it has “included provisions in the proposed rules intended not to discourage whistleblowers who work for companies that have robust compliance programs to first report the violation to appropriate company personnel . . .”.