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Whistleblowers: Incentives, Disincentives, and Protection Strategies by Frederick D. Lipman

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Chapter Eleven

A Step-by-Step Guide to SEC Whistleblower Awards under Dodd-Frank*

THE ENORMOUS SCOPE OF the bounty provisions of the Dodd-Frank Act has been discussed extensively in Chapter 1 of this book. The Securities and Exchange Commission (SEC) has been inundated with whistleblower tips since the passage of Dodd-Frank. From July 21, 2010, the date of enactment of Dodd-Frank, until February 2011, the SEC received approximately 168 whistleblower tips.1 According to the director of the SEC's Office of Market Intelligence, “his office was fielding one or two quality tips each day since the new law.”2

On May 25, 2011, the SEC adopted its final whistleblower rules under Dodd-Frank, effective August 12, 2011. The rules define a “whistleblower” as an individual who, alone or jointly with others, provides the SEC with information relating to a possible violation of the federal securities laws (including any rules or regulations thereunder) that has occurred, is ongoing, or is about to occur. A whistleblower must be an individual. A company or another entity is not eligible to be a whistleblower.

A summary of the highlights of the rules follows. Please note that the SEC uses a number of defined terms in its bounty award rules whose meaning will be explored in this chapter. After the summary we present 10 simple steps for complying with the rules and further discuss certain provisions of the rules.

SUMMARY

Subject to certain eligibility and other provisions, the SEC will pay an award ...

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