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Rani Doyle

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MONTH-IN-BRIEF (Nov 2022)

 

Securities Regulation

SEC Finalizes Whistleblower Rule Amendments

By Thomas W. White, Retired Partner, WilmerHale

The Securities and Exchange Commission has adopted two amendments to the rules governing its whistleblower award program that were proposed in February 2022. (As noted in a previous item, the amendments were proposed to modify provisions of the rules that were previously amended in 2020.) The latest amendments, which were adopted by a 3–2 vote in August, did the following:

  • Awards for Recoveries in “Related Actions”— Rule 21F-3(b)(3), as amended in 2020, restricted the circumstances in which a whistleblower can receive an award from the SEC based on monetary recoveries in “related actions” by certain other governmental agencies. Basically, the rule provided that a whistleblower could not recover under the SEC’s program where another agency maintains a whistleblower award program covering the action, unless the SEC finds “that its whistleblower program has the more direct or relevant connection to the action.” The SEC’s amendment will provide additional circumstances in which a non-SEC action may qualify as a related action without regard to whether the SEC’s program has a more direct or relevant connection to the action. These circumstances include:
    • when the non-SEC award program has an award range or fixed-dollar award cap that could yield an award that is meaningfully lower than what could be awarded under the SEC’s program;
    • when the decision to grant an award under the non-SEC program is discretionary, even when any specified award criteria and eligibility requirements have been satisfied, and
    • when the maximum award the SEC could pay on the action would not exceed $5 million.
  • Consideration of Dollar Amount of Awards—Rule 21F-6, as amended in 2020, provided that in all cases the SEC may consider the dollar amount of the award (as opposed to just the percentage of the monetary sanctions recovered), including, implicitly, adjusting the award downward based on its potential size. The new amendment eliminates the SEC’s ability to consider the dollar amount of a potential award for the purpose of decreasing an award.

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