Introduction
On May 5, 2023, the Securities and Exchange Commission (“SEC”) granted its largest-ever whistleblower award of $279M to an individual,[1] reportedly stemming from Ericsson’s $1.1B settlement to resolve claims that the telecommunications company violated the Foreign Corrupt Practices Act (“FCPA”).[2] Coupled with other recent enforcement actions by the SEC arising under applicable whistleblower protection rules (Dodd Frank’s Rule 21F-7) and the increasing number of whistleblowers to the SEC and U.S. Department of Justice (“DOJ”) who are corporate compliance officers and auditors, these events are warning signals to companies of the need to evaluate not only the robustness of their internal reporting and investigation mechanisms but also the extent to which they have instilled a “speak up” culture that encourages employees to raise issues.
SEC Whistleblower Protection Rules
Section 922 of the Dodd-Frank Act and the SEC Whistleblower Protection Rules (the “Rules”) issued in May 2011 provide a set of incentives and protections for individuals who choose to make reports to the SEC.[3] The purpose of these provisions is to encourage whistleblowing on potential securities law violations, borne of compliance and other transgressions, by providing confidentiality, anti-retaliation protections, and monetary rewards for tips that result in successful SEC actions.
If a tip-off leads to a successful enforcement action by the SEC resulting in monetary penalties over...
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