On February 10, 2022, the Securities and Exchange Commission (SEC) proposed amendments to Exchange Act Rules 21F-3 and 6, which govern the implementation of its whistleblower program. These amendments increase the SEC’s capacity to grant awards to whistleblowers, and are intended to incentivize whistleblowers to report potential violations of law to the SEC.
Section 21F of the Exchange Act directs the SEC to pay awards to certain whistleblowers who report information about a violation of the federal securities laws and regulations that leads to a successful enforcement action. These awards – which equal 10-30 percent of the monetary sanctions collected – can be significant, with the SEC awarding approximately US$1.2 billion to 245 individuals since the first award was issued in 2012, and a US$110 million award being issued in September 2021, which was the second-highest award in the program’s history. The proposed amendments, available here, specifically revise Rules 21F-3 and 21F-6, which were both last amended in September 2020.
Rule 21F-3 addresses situations in which the SEC’s whistleblower program and at least one other whistleblower program may apply to the same related action. Currently, Rule 21F-3 authorizes the SEC to determine which whistleblower program has a more direct or relevant connection to the underlying action; this determination controls whether the award made to the whistleblower comes from the SEC program or the other applicable program, and can...
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