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SEC boosts whistleblower incentives

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The Securities and Exchange Commission has adopted two amendments to the rules governing its whistleblower programme. The first rule change allows the Commission to pay whistleblowers for their information and assistance in connection with non-SEC actions in additional circumstances, while the second rule affirms the Commission’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award but not to lower an award.

Specifically, the SEC amended Rule 21F-3 to allow the Commission to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity’s whistleblower programme. The amendments allow for such awards when the other entity’s programme is not comparable to the Commission’s own programme or if the maximum award that the Commission could pay on the related action would not exceed $5 million.

Further, the amendments affirm the Commission’s authority under Rule 21F-6 to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and it would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.

The SEC’s whistleblower programme was established in 2010 to encourage individuals to report high-quality tips to the Commission and help the agency detect wrongdoing and better protect investors and the marketplace. The programme has made significant contributions to the effectiveness of the agency’s enforcement of the federal securities laws. Since the programme’s inception, enforcement matters brought using original information from meritorious whistleblowers have resulted in orders for more than $5 billion in total monetary sanctions. The Commission has awarded more than $1.3 billion to meritorious whistleblowers under the programme.

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

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