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Financial Services Law Insights and Observations

SEC amends whistleblower program rules

Agency Rule-Making & Guidance SEC Whistleblower

Agency Rule-Making & Guidance

On September 23, the SEC voted to adopt amendments to the rules governing its whistleblower program. According to the SEC, the amendments are meant to “provide greater transparency, efficiency and clarity, and to strengthen and bolster the program.” The amendments were proposed for public comment in June 2018 (covered by InfoBytes here) and have been adopted with some changes. Highlights include:

  • Award Determinations. The amendments (i) add Exchange Act Rule 21F-6(c), which provides a presumption that meritorious claimants will receive the statutory maximum amount, for awards $5 million or less, where none of the negative award criteria specified in Rule 21F-6(b) are present, with certain exceptions; (ii) amend the definition of “action” to allow awards based on deferred prosecution agreements and non-prosecution agreements entered into by the DOJ or a state attorney general in a criminal case, or settlement agreements entered into by the SEC outside of a judicial or administrative proceeding that address securities law violations; and (iii) codify that a law-enforcement or separate regulatory action does not qualify as a “related action,” if there is a separate award scheme that more appropriately applies. Additional details can be found in the SEC Office of the Whistleblower’s concurrently released staff guidance regarding the process for determining award amounts for eligible whistleblowers.
  • Definition of Whistleblower. The amendments establish a uniform definition of “whistleblower” that will apply to all aspects of Exchange Act Section 21F, in response to the Supreme Court's decision in Digital Realty Trust, Inc. v. Somers (as previously covered in a Buckley Special Alert).
  • Increased Efficiency. The amendments (i) allow for a permanent bar of any applicant from seeking an award after that applicant has submitted three frivolous award applications; and (ii) allow for a summary disposition procedure for certain common denials.
  • Others. The amendments also clarify and enhance certain policies, practices, and procedures in implementing the program, including allowing the waiver of Tip, Complaint or Referral (TCR) filing requirements if a whistleblower complies with the requirements within 30 days of (i) first providing the information; or (ii) first obtaining notice of the TCR filing requirements. 

The amendments are effective 30 days after publication in the Federal Register.