The SEC voted on May 25, 2011 to adopt final rules governing a whistleblower program to reward individuals who provide the agency with high-quality tips that lead to successful enforcement actions. The most contentious issue raised during the comment period was whether employees’ new financial incentives to complain to the SEC would undercut the effectiveness of their companies’ internal compliance programs. The final rules seek to ameliorate this concern by adding counter-incentives for employees to comply with internal procedures, although they do not go so far as to require whistleblowers to report violations internally first. The attached memorandum summarizes the key provisions under the new rules and discusses what they may mean for existing internal compliance programs.
