SEC Proposes Expansive Whistleblower Rule
The SEC has proposed a new whistleblower rule under the Dodd-Frank Act that would pay up to 30% of monetary sanctions awarded to the SEC in an administrative action or civil case. Under the proposal, nearly anybody can be a whistleblower so long as such person in not the company’s lawyer, accountant, or compliance officer. However, even compliance personnel may serve as whistleblowers if the company does not “disclose the information to the Commission within a reasonable period of time.” The proposal applies to any securities law violation whether involving a private or public company. It also does not require a whistleblower to utilize the company’s internal compliance program. The proposal would only apply if monetary sanctions exceed $1 Million.
OUR TAKE: We don’t think the SEC could have drafted a broader rule. We believe that providing these types of incentives to whistleblowers will undermine internal compliance programs and encourage frivolous claims. If the rule is adopted as proposed, consider it a gift to the plaintiff’s lawyers.
Posted by Todd Cipperman at 11/4/2010 5:14 AM 
Categories: Compliance and Operations
Tags: whistleblower award sec action
Categories: Compliance and Operations
Tags: whistleblower award sec action
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