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SEC's New Whistleblower Program Takes Effect

Friday, August 19, 2011
Sima Saran Ahuja | Bloomberg LawSEC Press Release No. PR-2011-167 (Aug. 12, 2011); SEC Speech, Sean X. McKessey, Remarks at Georgetown University (Aug. 11, 2011) The Securities and Exchange Commission (SEC) announced that its new whistleblower program, authorized earlier this year under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), is now in effect. The whistleblower rules provide a monetary incentive for individuals who voluntarily provide the SEC with original and timely information about a securities law violation that leads to a successful SEC action with sanctions exceeding $1 million. See Bloomberg Law Reports®—Securities Law, Whistleblower Program Rules Adopted by the SEC (May 27, 2011).

New SEC Whistleblower Webpage

As part of the program, the SEC launched a whistleblower webpage to facilitate the reporting of violations. The webpage includes information regarding eligibility requirements, directions on how to submit a tip, and instructions on how to apply for an award. In a recent speech, Sean X. McKessey, Chief of the Office of the Whistleblower, commented that the SEC “simply cannot be everywhere.” In praising the utility of the new program and webpage, McKessey commented that it is “crucial to our work. It will help us to more quickly identify and pursue frauds that we might not have otherwise found on our own.”

Defense of Whistleblower Program Criticism

In his remarks, McKessey also addressed criticism of the whistleblower rules. For example, he noted that, while critics of the rules have suggested that they may hamper companies' internal compliance systems, in fact the program will “bolster” such systems. McKessey asserted that the SEC’s whistleblower program extends “significant benefits” to whistleblowers that report internally and that it “is a balanced approach designed to aid the SEC by encouraging those aware of misconduct to come forward while . . . incentivizing those individuals to report their suspicions of misconduct to their companies first.” McKessey further defended the narrow exceptions in which attorneys, compliance personnel, and external auditors may be whistleblowers. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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