Final Whistleblower Rules Effective August 12: Dodd-Frank Update

The Securities and Exchange Commission’s final rules implementing the whistleblower provisions of the Dodd-Frank Act take effect on August 12, 2011.

For your peparation, here’s a reference list of pertinent whistleblower updates and commentary from law firms covering Dodd-Frank and related topics on JD Supra:

Final Whistleblower Provisions Take Effect August 12th Is Your Company Ready? (Dinsmore & Shohl LLP):

“Much of the controversy surrounding the proposed rules is the absence of any requirement that a whistleblower report initial findings through a company’s internal compliance program. Commentators have argued that the rules will serve to undermine existing compliance programs by providing large financial incentives for employees to bypass such programs to reap life changing rewards. Despite the objections of numerous commentators, the final rules do not require a whistleblower to report violations internally in order to qualify for an award.” Read more»

SEC Adopts Final Rules on Dodd-Frank Whistleblower Program (Duane Morris LLP):

“Dodd-Frank directed the SEC to adopt regulations to provide payment of awards to eligible individuals for reporting violations of federal securities laws to the federal government. … The Rules raise some challenging issues, perhaps the most significant being the impact on existing compliance and corporate governance procedures. Listed entities may be concerned that their compliance programs will be bypassed by whistleblowers who now have strong incentives to place their personal interests ahead of loyalties to their employers.” Read more»

FAQs re Dodd-Frank Whistleblower Rules (Fenwick & West LLP):

“… This new section requires the SEC to pay awards to whistleblowers who provide the SEC with original information about a violation of the federal securities laws that leads to successful enforcement action and monetary sanctions in excess of $1 million. On May 25, 2011 the SEC adopted final rules to implement this Dodd-Frank mandate (‘Whistleblower Rules’). The Whistleblower Rules define the conditions that must be met for whistleblowers to be eligible for an award. They include provisions to protect whistleblowers from retaliation, and encourage (but do not require) whistleblowers to utilize a company’s internal reporting system.” Read more»

SEC Adopts Final Rules To Establish Whistleblower Program (Pryor Cashman LLP):

“Because of the financial incentives offered by the whistleblower rules, an employee with knowledge of a violation could be encouraged to bypass the employer’s compliance process and go to the SEC directly.  If this became accepted practice, critics said, it would render internal compliance procedures meaningless, leaving the employer to learn of the violation first from the SEC investigator responding to the employee’s information.” Read more»

SEC Adopts Final Dodd-Frank Whistleblower Rules (Womble Carlyle Sandridge & Rice, PLLC):

“Section 21F of the Exchange Act also prohibits retaliation by employers against individuals who provide the SEC with information about possible securities violations. Significantly, despite many commentators’ objections, the final rules do not require whistleblowers to report potential securities law violations through a company’s internal compliance program as a prerequisite to an award. The final rules, which apply to both public and private companies, will be effective on August 12, 2011.” Read more»

SEC Adopts Final Whistleblower Bounty Rules under Dodd-Frank (Mintz Levin – Corporate Practice):

“These rules are among the most controversial of the SEC’s rulemaking to date under the Dodd-Frank Act, in part because many in the business community anticipated that the rules will prompt would-be whistleblowers to circumvent companies’ internal whistleblowing procedures and send reports of potential violations directly to the SEC in the hopes of obtaining a ‘bounty.’” Read more»


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