The Securities and Exchange Commission has adopted new rules (PDF) that create financial incentives and legal protections for whistle-blowers of public companies that are accused of violating securities laws. The rules take effect 60 days after they're submitted to Congress.
SEC adopts whistle-blower protections
Notably, the 305-page final rule does not force potential whistle-blowers to use their companies’ internal compliance programs before reporting alleged violations to the SEC.
However, SEC officials said in a news release that they tried to encourage use of internal compliance programs by giving whistle-blowers the ability to collect a portion of settlements that a company pays as a result of an internal complaint that is eventually self-reported by the company to the commission.
In general, whistle-blowers of publicly traded companies can collect between 10% and 30% of awards from SEC enforcement actions against companies when information derived from direct knowledge by an employee leads to an award of more than $1 million.
The SEC program also protects whistle-blowers from employer retaliation and makes it illegal for an employer to attempt to prevent the filing of SEC complaints, including by threatening to impose corporate confidentiality agreements.
The SEC was ordered to create the whistle-blower program by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
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