The Brief: The Securities and Exchange Commission adopted two key amendments to the rules governing its whistleblower program. These amendments incentivize whistleblower tips by ensuring that rewards can only be increased, not reduced, by the SEC.

Your Next Move: These amendments became effective at the end of September 2022: build a legal partnership now in order to benefit from these changes.

The Securities and Exchange Commission (SEC) announced on August 26, 2022 two key whistleblower rule changes. We first reported on these rule changes at the time they were proposed; now that they have been adopted by the SEC, whistleblowers are further incentivized to provide high-quality information and assist in bringing fraud to light.

Amendment One: Payment in Connection with non-SEC Actions

The SEC has formally adopted a rule change whereby it may pay out awards for actions brought by other agencies. SEC Chair Gary Gensler says that this rule change “expands the circumstances in which a whistleblower who assisted in a related action can receive an award from the [SEC]…rather than from the other agency’s whistleblower program.” Sometimes, the SEC is able to offer a higher award than another agency, and whistleblowers who work with other agencies now can be considered for an award from the SEC for the related action. 

This amendment should come as good news for prospective whistleblowers: these rule changes provide greater flexibility for whistleblowers. They also allow for potentially greater whistleblower rewards. 

Amendment Two: Review of Award Amounts

The second amendment grants the SEC the limited power to consider the amount of an award only in order to increase that amount, and not, as Gensler says, to decrease it. In other words, the amendment “eliminate[s] the [SEC]’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.” Potential whistleblowers should welcome this news: the SEC has affirmed that it will not arbitrarily reduce award amounts after a whistleblower has followed agency guidance and complied with agency rules.

Protecting Investors, Protecting Whistleblowers

In Gensler’s opinion, these rule changes “will strengthen [the SEC’s] whistleblower program. That helps protect investors.” The two, in the consideration of the SEC, go hand in hand: investors, and marketplaces more broadly, are freer and more secure when agencies protect those willing to stand up in the face of fraud. Streamlining whistleblower programs like this helps benefit whistleblowers and investors alike.

Are you a potential whistleblower? Do you have questions about next steps in light of these rule changes? Contact us today.