SEC Amends Whistleblower Rules

SEC Amends Whistleblower Rules

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On September 23, 2020, the SEC also amended the whistleblower rules (SEC Press Release 2020-219). These rule amendments are detailed in SEC Release No. 34-89963 (available at: https://www.sec.gov/rules/final/2020/34-89963.pdf).

The whistleblower rules (Section 21F of the Securities Exchange Act of 1934, as added by Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act) authorize the SEC to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions greater than $1 million.

The SEC based these amendments on its experience with the whistleblower rules. Under the amendments, for awards of $5 million or less, a presumption will exist that the statutory maximum amount will be awarded. For awards over $5 million, the SEC will continue to analyze the award factors specified in Rule 21F-6 when determining the size of a whistleblower award.

The amendments expand the definition of “action” to include deferred prosecution agreements and non-prosecution agreements. This ensures whistleblowers are not disadvantaged because of the particular form of an action that the SEC or Department of Justice may elect to pursue.

The amendments also adopt a uniform definition of “whistleblower” that will apply to all aspects of the whistleblower rules.

Finally, the amendments create an automatic waiver of compliance with the portion of the rules that specifies how the whistleblower must notify the SEC if the whistleblower provides the SEC with the correct form (Form TCR) within 30 days of first providing the information or within 30 days of first obtaining actual or constructive notice about the rule’s notification requirements.

The amendments offer a number of other clarifications for the whistleblower rules, which should help folks that wish to pursue a whistleblower claim.

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

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