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The SEC has released the text of its proposed new rules
for implementing the whistleblower provisions of Section 21F of the Securities
Exchange Act of 1934: Release
In fashioning these proposed rules, the Commission has
considered and weighed a number of potentially competing interests that are
presented in implementing the statute. Among them was the potential for the
monetary incentives provided to whistleblowers by Section 21F of the Exchange
Act to reduce the effectiveness of a company's existing compliance, legal,
audit and similar internal processes for investigating and responding to
potential violations of the federal securities laws. With this possible tension
in mind, we have included provisions in the proposed rules intended not to
discourage whistleblowers who work for companies that have robust compliance
programs to first report the violation to appropriate company personnel, while
at the same time preserving the whistleblower's status as an original source of
the information and eligibility for an award. At the same time, the proposed
rules would not prohibit a whistleblower in a compliance function from
reporting information to the Commission where the company did not provide the
information to the Commission within a reasonable time or acted in bad faith.
At this point, it is merely a proposed rule. Comments should
be submitted on or before December 17, 2010.
There will be a new Form TCR for submitting a tip,
complaint or referral and a new Form WB-DEC, Declaration Concerning Original
Information Provided Pursuant to §21F of the Securities Exchange Act of 1934,
signed under penalty of perjury, for submission to the SEC to meet the
standards of the new regulations.
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
For More Information:
Dodd-Frank whistleblowers are discussed in
greater detail in 2 A.A. Sommer Jr., Federal Securities Exchange Act
of 1934 Sec. 9.12 (Matthew Bender Rev. Ed.), "Specialized Treatment of
Illicit Insider Trading," which can be accessed online by subscribers of lexis.com. This
treatise is also available on the LexisNexis online store.