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SEC Amends Whistleblower Rules—Seeks To Encourage More Whistleblower Tips

In 2010, the United States Congress created the SEC whistleblower program as part of the Dodd-Frank Act. Through the whistleblower program, securities industry insiders and others with relevant information can receive a financial reward for voluntarily coming forward and reporting information to regulators that leads to successful enforcement action in a securities fraud case.

After two-record breaking years for whistleblower compensation, the SEC is further expanding the program. On August 26th, 2022, the Securities and Exchange Commission (SEC) announced new rules designed to encourage more tips from potential whistleblowers. Here, our Miami investment fraud lawyer highlights the most important things to know about the new rules and regulations.

Two Key Changes to the SEC Whistleblower Program 

  1. Rule Change #1: Expand the Circumstances in Which Whistleblower Can Qualify for Award 

There are strict requirements that must be satisfied before a person can qualify for whistleblower compensation through the SEC’s whistleblower program. In order to encourage more people to come forward and voluntarily disclose evidence or suspicions of securities fraud, the SEC is changing the rules in a manner that expands the number of people who can qualify for an award.

More specifically, the Securities and Exchange Commission is amending Rule 21F-3 to allow the agency to pay out compensation to whistleblowers in relation to related actions brought by other federal agencies. The rules change allows the SEC to award up to $5 million in whistleblower compensation in these types of cases.   

  1. Rule Change #2: Increase the Amount of Whistleblower Compensation in Certain Situations 

The SEC is also amending Rule 21F-6. The amendment gives the federal agency additional authority to award a greater amount of whistleblower compensation in certain circumstances. Under the existing rules, the value of an SEC whistleblower award is between 10 percent and 30 percent of the ultimate recovery by the government. Within that range, the SEC has discretion. The agency adjusts awards based on the specific circumstances of the case. A whistleblower deemed to be especially helpful in stopping securities fraud may be awarded compensation at the top of the range.

The amended Rule 21F-6 will give the SEC more power to increase whistleblower awards in some situations. Specifically, the new rule gives the SEC the power to consider the actual dollar amount of the award—not just the percentage. In doing so, the SEC will be empowered to increase a whistleblower award based solely on the dollar amount. In other words, the agency may grant certain whistleblowers compensation beyond the statutory range. Notably, the SEC will not have the power to decrease whistleblower compensation based on the actual dollar amount.

Set Up a Strictly Private Case Evaluation With an SEC Whistleblower Attorney

At ​Carlson & Associates, P.A., we provide legal representation to whistleblowers in the securities industry. If you are considering making a confidential disclosure through the SEC whistleblower program, we are here as a resource. Give us a call now or connect with us online to set up a confidential review and evaluation of your case. From our office in Miami, our SEC whistleblower attorney represents whistleblowers in South Florida and beyond.


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