SEC Adds Clarity, Efficiency and Transparency to Whistleblower Award Program

The SEC adopted amendments to the rules governing its whistleblower program designed to provide greater clarity to whistleblowers and increase the program’s efficiency and transparency. The SEC’s Office of the Whistleblower also published guidance regarding the process for determining award amounts for eligible whistleblowers. The amendments provide a mechanism for whistleblowers with potential awards of less than $5 million (nearly 75% of all whistleblower awards), subject to certain criteria, to qualify for a presumption that they will receive the maximum statutory award amount.  Other awards will continue to be evaluated consistent with past practice. The amendments also affirm that award amounts—which the Commission has the discretion to determine in percentage terms, dollar terms or some combination—are to be determined exclusively based on the application of the award factors set forth in the whistleblower rules. The SEC emphasized that there is not a separate (post application of the award factors) assessment of whether award amounts are too small or too large.  Commissioners Allison Herren Lee and Caroline Crenshaw challenged the amendments, saying that the SEC’s ability to use its discretion to consider the dollar amount when applying the award criteria could hinder transparency.  Lawyers quoted in a Wall Street Journal article voiced similar concerns. Commissioner Crenshaw also expressed concern about whether the rule sufficiently protects certain whistleblowers who experience retaliation. The whistleblower rule amendments will become effective 30 days after publication in the Federal Register.