Will Proposed SEC Whistleblower Rules Prevent the Undermining of Corporate Compliance Programs?

The US Securities and Exchange Commission has proposed new rules to implement the whistleblower provisions of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Among other things, the proposed rules, announced on November 3, 2010, attempt to address the substantial incentives for employees to bypass their own company's internal compliance programs.

The proposed whistleblower rules

The significant incentives under the whistleblower provisions of Dodd-Frank are bound to result in increased whistleblower activity, which may lead to action by US law enforcement authorities. Since the passage of the Dodd-Frank Act, parties potentially affected by whistleblower activity, including public companies, have expressed concerns regarding the scope of the new law. As written, the whistleblower law could undermine a company's internal compliance program. Additional concerns have been raised regarding the eligibility requirements for