SEC Adopts Expansive Whistleblower Rules
The SEC adopted new whistleblower rules allowing the payment of 10%-30% of monetary sanctions resulting from original information provided by the whistleblower that lead to penalties exceeding $1 Million. The rules do not require whistleblowers to first utilize a firm’s internal complaint and whistleblower process. In-house lawyers and compliance professionals are generally excluded, although a compliance or internal audit professional may become a whistleblower if such person reports the information internally and waits 120 days or believes that reporting will “prevent substantial injury” to the firm or is necessary because the firm is impeding an investigation. Whistleblowers are protected from employment retaliation.
OUR TAKE: The rule creates a real conundrum for compliance officers. As a person responsible for monitoring compliance with the securities laws, the compliance officer has a duty to report (and pursue remedies for) compliance violations. Do the new whistleblower rules implicitly require a compliance officer to become a whistleblower if his/her firm does not remedy a reported issue within 120 days?