Changes will Benefit Whistleblowers
The U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower is a division of the Commission charged with protecting the rights of individuals who come forward with information regarding misconduct by public companies, accounting firms, and other persons and entities covered by the securities laws. The Office of the Whistleblower receives and evaluates information from whistleblowers about fraud and other violations of the federal securities laws.
The Office of the Whistleblower was established in 2003 by the Sarbanes-Oxley Act.
In February 2022 the SEC proposed two amendments to the rules governing its whistleblower program. The first proposed amendment concerns award claims for related actions that would be otherwise covered by an alternative whistleblower program. The second affirms the Commission’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award but not to lower an award.
“These amendments, if adopted, would help ensure that whistleblowers are both incentivized and appropriately rewarded for their efforts in reporting potential violations of the law to the Commission,” said SEC Chair Gary Gensler. “The first proposed rule change is designed to ensure that a whistleblower is not disadvantaged by another whistleblower program that would not give them as high an award as the SEC would offer. Under the second proposed rule change, the SEC could consider the dollar amounts of potential awards only to increase the whistleblower’s award. This would give whistleblowers additional comfort knowing that the SEC could consider the dollar amount of the award only in such cases.”
Specifically, the proposed amendment to Rule 21F-3 would allow the Commission to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity’s whistleblower program. The proposed amendments also would affirm the Commission’s authority under Rule 21F-6 to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and it would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.