SEC Proposes New Rules Seeking to Implement Dodd-Frank Whistleblower Program in a Way That Encourages Strong Compliance Programs

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the SEC to pay bounties to individuals who provide the Commission with original information that leads to successful SEC enforcement actions and certain related actions. Dodd-Frank substantially expanded the agency's authority to compensate individuals who provide the SEC with information about violations of the federal securities laws. Since the enactment of Dodd-Frank, companies have been understandably concerned that the new whistleblower statute would undermine corporate compliance programs by incentivizing employees to provide information regarding potential violations to the SEC rather than vetting that information internally.