H. R. 4173—466 

activities and evaluates the effectiveness of the Ombudsman during the preceding year. The Investor Advocate 

shall include the reports required under this section in 

the reports required to be submitted by the Inspector Advocate under paragraph (6).’’. 

Subtitle B—Increasing Regulatory 

Enforcement and Remedies 

SEC. 921. 	AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE 

ARBITRATION. 

(a) AMENDMENT TO SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), 

as amended by this title, is further amended by adding at the 

end the following new subsection: 

‘‘(o) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.—The Commission, by rule, may prohibit, or impose conditions 

or limitations on the use of, agreements that require customers 

or clients of any broker, dealer, or municipal securities dealer 

to arbitrate any future dispute between them arising under the 

Federal securities laws, the rules and regulations thereunder, or 

the rules of a self-regulatory organization if it finds that such 

prohibition, imposition of conditions, or limitations are in the public 

interest and for the protection of investors.’’. 

(b) AMENDMENT TO INVESTMENT ADVISERS ACT OF 1940.—Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

5) is amended by adding at the end the following new subsection: 

‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRA- TION.—The Commission, by rule, may prohibit, or impose conditions 

or limitations on the use of, agreements that require customers 

or clients of any investment adviser to arbitrate any future dispute 

between them arising under the Federal securities laws, the rules 

and regulations thereunder, or the rules of a self-regulatory 

organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection 

of investors.’’. 

SEC. 922. WHISTLEBLOWER PROTECTION. 

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) is amended by inserting after section 21E 

the following: 

‘‘SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION. 

‘‘(a) DEFINITIONS.—In this section the following definitions shall 

apply: 

‘‘(1) COVERED JUDICIAL OR ADMINISTRATIVE ACTION.—The 

term ‘covered judicial or administrative action’ means any 

judicial or administrative action brought by the Commission 

under the securities laws that results in monetary sanctions 

exceeding $1,000,000. 

‘‘(2) FUND.—The term ‘Fund’ means the Securities and 

Exchange Commission Investor Protection Fund. 

‘‘(3) ORIGINAL INFORMATION.—The term ‘original information’ means information that— 
H. R. 4173—467 

‘‘(A) is derived from the independent knowledge or 

analysis of a whistleblower; 

‘‘(B) is not known to the Commission from any other 

source, unless the whistleblower is the original source of 

the information; and 

‘‘(C) is not exclusively derived from an allegation made 

in a judicial or administrative hearing, in a governmental 

report, hearing, audit, or investigation, or from the news 

media, unless the whistleblower is a source of the information. 

‘‘(4) MONETARY SANCTIONS.—The term ‘monetary sanctions’, 

when used with respect to any judicial or administrative action, 

means— 

‘‘(A) any monies, including penalties, disgorgement, 

and interest, ordered to be paid; and 

‘‘(B) any monies deposited into a disgorgement fund 

or other fund pursuant to section 308(b) of the SarbanesOxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such 

action or any settlement of such action. 

‘‘(5) RELATED ACTION.—The term ‘related action’, when used 

with respect to any judicial or administrative action brought 

by the Commission under the securities laws, means any 

judicial or administrative action brought by an entity described 

in subclauses (I) through (IV) of subsection (h)(2)(D)(i) that 

is based upon the original information provided by a whistleblower pursuant to subsection (a) that led to the successful 

enforcement of the Commission action. 

‘‘(6) WHISTLEBLOWER.—The term ‘whistleblower’ means any 

individual who provides, or 2 or more individuals acting jointly 

who provide, information relating to a violation of the securities 

laws to the Commission, in a manner established, by rule 

or regulation, by the Commission. 

‘‘(b) AWARDS.— ‘‘(1) IN GENERAL.—In any covered judicial or administrative 

action, or related action, the Commission, under regulations 

prescribed by the Commission and subject to subsection (c), 

shall pay an award or awards to 1 or more whistleblowers 

who voluntarily provided original information to the Commission that led to the successful enforcement of the covered 

judicial or administrative action, or related action, in an aggregate amount equal to— 

‘‘(A) not less than 10 percent, in total, of what has 

been collected of the monetary sanctions imposed in the 

action or related actions; and 

‘‘(B) not more than 30 percent, in total, of what has 

been collected of the monetary sanctions imposed in the 

action or related actions. 

‘‘(2) PAYMENT OF AWARDS.—Any amount paid under paragraph (1) shall be paid from the Fund. 

‘‘(c) DETERMINATION OF AMOUNT OF AWARD; DENIAL OF 

AWARD.— 

‘‘(1) DETERMINATION OF AMOUNT OF AWARD.— ‘‘(A) DISCRETION.—The determination of the amount 

of an award made under subsection (b) shall be in the 

discretion of the Commission. 

‘‘(B) CRITERIA.—In determining the amount of an 

award made under subsection (b), the Commission— 
H. R. 4173—468 

‘‘(i) shall take into consideration— 

‘‘(I) the significance of the information provided by the whistleblower to the success of the 

covered judicial or administrative action; 

‘‘(II) the degree of assistance provided by the 

whistleblower and any legal representative of the 

whistleblower in a covered judicial or administrative action; 

‘‘(III) the programmatic interest of the 

Commission in deterring violations of the securities laws by making awards to whistleblowers who 

provide information that lead to the successful 

enforcement of such laws; and 

‘‘(IV) such additional relevant factors as the 

Commission may establish by rule or regulation; 

and 

‘‘(ii) shall not take into consideration the balance 

of the Fund. 

‘‘(2) DENIAL OF AWARD.—No award under subsection (b) 

shall be made— 

‘‘(A) to any whistleblower who is, or was at the time 

the whistleblower acquired the original information submitted to the Commission, a member, officer, or employee 

of— 

‘‘(i) an appropriate regulatory agency; 


‘‘(ii) the Department of Justice; 


‘‘(iii) a self-regulatory organization; 


‘‘(iv) the Public Company Accounting Oversight 


Board; or 

‘‘(v) a law enforcement organization; 

‘‘(B) to any whistleblower who is convicted of a criminal 

violation related to the judicial or administrative action 

for which the whistleblower otherwise could receive an 

award under this section; 

‘‘(C) to any whistleblower who gains the information 

through the performance of an audit of financial statements 

required under the securities laws and for whom such 

submission would be contrary to the requirements of section 

10A of the Securities Exchange Act of 1934 (15 U.S.C. 

78j–1); or 

‘‘(D) to any whistleblower who fails to submit information to the Commission in such form as the Commission 

may, by rule, require. 

‘‘(d) REPRESENTATION.— 

‘‘(1) PERMITTED REPRESENTATION.—Any whistleblower who 

makes a claim for an award under subsection (b) may be 

represented by counsel. 

‘‘(2) REQUIRED REPRESENTATION.— 

‘‘(A) IN GENERAL.—Any whistleblower who anonymously makes a claim for an award under subsection (b) 

shall be represented by counsel if the whistleblower anonymously submits the information upon which the claim is 

based. 

‘‘(B) DISCLOSURE OF IDENTITY.—Prior to the payment 

of an award, a whistleblower shall disclose the identity 

of the whistleblower and provide such other information 
H. R. 4173—469 

as the Commission may require, directly or through counsel 

for the whistleblower. 

‘‘(e) NO CONTRACT NECESSARY.—No contract with the Commission is necessary for any whistleblower to receive an award under 

subsection (b), unless otherwise required by the Commission by 

rule or regulation. 

‘‘(f) APPEALS.—Any determination made under this section, 

including whether, to whom, or in what amount to make awards, 

shall be in the discretion of the Commission. Any such determination, except the determination of the amount of an award if the 

award was made in accordance with subsection (b), may be appealed 

to the appropriate court of appeals of the United States not more 

than 30 days after the determination is issued by the Commission. 

The court shall review the determination made by the Commission 

in accordance with section 706 of title 5, United States Code. 

‘‘(g) INVESTOR PROTECTION FUND.— 

‘‘(1) FUND ESTABLISHED.—There is established in the 

Treasury of the United States a fund to be known as the 

‘Securities and Exchange Commission Investor Protection 

Fund’. 

‘‘(2) USE OF FUND.—The Fund shall be available to the 

Commission, without further appropriation or fiscal year limitation, for— 

‘‘(A) paying awards to whistleblowers as provided in 

subsection (b); and 

‘‘(B) funding the activities of the Inspector General 

of the Commission under section 4(i). 

‘‘(3) DEPOSITS AND CREDITS.— 

‘‘(A) IN GENERAL.—There shall be deposited into or 

credited to the Fund an amount equal to— 

‘‘(i) any monetary sanction collected by the 

Commission in any judicial or administrative action 

brought by the Commission under the securities laws 

that is not added to a disgorgement fund or other 

fund under section 308 of the Sarbanes-Oxley Act of 

2002 (15 U.S.C. 7246) or otherwise distributed to victims of a violation of the securities laws, or the rules 

and regulations thereunder, underlying such action, 

unless the balance of the Fund at the time the monetary sanction is collected exceeds $300,000,000; 

‘‘(ii) any monetary sanction added to a 

disgorgement fund or other fund under section 308 

of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246) 

that is not distributed to the victims for whom the 

Fund was established, unless the balance of the 

disgorgement fund at the time the determination is 

made not to distribute the monetary sanction to such 

victims exceeds $200,000,000; and 

‘‘(iii) all income from investments made under 

paragraph (4). 

‘‘(B) ADDITIONAL AMOUNTS.—If the amounts deposited 

into or credited to the Fund under subparagraph (A) are 

not sufficient to satisfy an award made under subsection 

(b), there shall be deposited into or credited to the Fund 

an amount equal to the unsatisfied portion of the award 

from any monetary sanction collected by the Commission 
H. R. 4173—470 

in the covered judicial or administrative action on which 


the award is based. 


‘‘(4) INVESTMENTS.— 


‘‘(A) AMOUNTS IN FUND MAY BE INVESTED.—The 

Commission may request the Secretary of the Treasury 

to invest the portion of the Fund that is not, in the discretion of the Commission, required to meet the current needs 

of the Fund. 

‘‘(B) ELIGIBLE INVESTMENTS.—Investments shall be 

made by the Secretary of the Treasury in obligations of 

the United States or obligations that are guaranteed as 

to principal and interest by the United States, with maturities suitable to the needs of the Fund as determined 

by the Commission on the record. 

‘‘(C) INTEREST AND PROCEEDS CREDITED.—The interest 

on, and the proceeds from the sale or redemption of, any 

obligations held in the Fund shall be credited to the Fund. 

‘‘(5) REPORTS TO CONGRESS.—Not later than October 30 

of each fiscal year beginning after the date of enactment of 

this subsection, the Commission shall submit to the Committee 

on Banking, Housing, and Urban Affairs of the Senate, and 

the Committee on Financial Services of the House of Representatives a report on— 

‘‘(A) the whistleblower award program, established 

under this section, including— 

‘‘(i) a description of the number of awards granted; 

and 

‘‘(ii) the types of cases in which awards were 

granted during the preceding fiscal year; 

‘‘(B) the balance of the Fund at the beginning of the 

preceding fiscal year; 

‘‘(C) the amounts deposited into or credited to the 

Fund during the preceding fiscal year; 

‘‘(D) the amount of earnings on investments made 

under paragraph (4) during the preceding fiscal year; 

‘‘(E) the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection 

(b); 

‘‘(F) the balance of the Fund at the end of the preceding 

fiscal year; and 

‘‘(G) a complete set of audited financial statements, 

including— 


‘‘(i) a balance sheet; 


‘‘(ii) income statement; and 


‘‘(iii) cash flow analysis. 


‘‘(h) PROTECTION OF WHISTLEBLOWERS.— 

‘‘(1) PROHIBITION AGAINST RETALIATION.— 

‘‘(A) IN GENERAL.—No employer may discharge, 

demote, suspend, threaten, harass, directly or indirectly, 

or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because 

of any lawful act done by the whistleblower— 

‘‘(i) in providing information to the Commission 

in accordance with this section; 

‘‘(ii) in initiating, testifying in, or assisting in any 

investigation or judicial or administrative action of 
H. R. 4173—471 

the Commission based upon or related to such information; or 

‘‘(iii) in making disclosures that are required or 

protected under the Sarbanes-Oxley Act of 2002 (15 

U.S.C. 7201 et seq.), the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.), including section 10A(m) 

of such Act (15 U.S.C. 78f(m)), section 1513(e) of title 

18, United States Code, and any other law, rule, or 

regulation subject to the jurisdiction of the Commission. 

‘‘(B) ENFORCEMENT.— ‘‘(i) CAUSE OF ACTION.—An individual who alleges 

discharge or other discrimination in violation of 

subparagraph (A) may bring an action under this subsection in the appropriate district court of the United 

States for the relief provided in subparagraph (C). 

‘‘(ii) SUBPOENAS.—A subpoena requiring the 

attendance of a witness at a trial or hearing conducted 

under this section may be served at any place in the 

United States. 

‘‘(iii) STATUTE OF LIMITATIONS.— 

‘‘(I) IN GENERAL.—An action under this subsection may not be brought— 

‘‘(aa) more than 6 years after the date 

on which the violation of subparagraph (A) 

occurred; or 

‘‘(bb) more than 3 years after the date 

when facts material to the right of action are 

known or reasonably should have been known 

by the employee alleging a violation of 

subparagraph (A). 

‘‘(II) REQUIRED ACTION WITHIN 10 YEARS.—Notwithstanding subclause (I), an action under this 

subsection may not in any circumstance be brought 

more than 10 years after the date on which the 

violation occurs. 

‘‘(C) RELIEF.—Relief for an individual prevailing in an 

action brought under subparagraph (B) shall include— 

‘‘(i) reinstatement with the same seniority status 

that the individual would have had, but for the 

discrimination; 

‘‘(ii) 2 times the amount of back pay otherwise 

owed to the individual, with interest; and 

‘‘(iii) compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees. 

‘‘(2) CONFIDENTIALITY.— ‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the Commission and any officer or 

employee of the Commission shall not disclose any information, including information provided by a whistleblower 

to the Commission, which could reasonably be expected 

to reveal the identity of a whistleblower, except in accordance with the provisions of section 552a of title 5, United 

States Code, unless and until required to be disclosed to 

a defendant or respondent in connection with a public 

proceeding instituted by the Commission or any entity 

described in subparagraph (C). For purposes of section 
H. R. 4173—472 

552 of title 5, United States Code, this paragraph shall 

be considered a statute described in subsection (b)(3)(B) 

of such section. 

‘‘(B) EXEMPTED STATUTE.—For purposes of section 552 

of title 5, United States Code, this paragraph shall be 

considered a statute described in subsection (b)(3)(B) of 

such section 552. 

‘‘(C) RULE OF CONSTRUCTION.—Nothing in this section 

is intended to limit, or shall be construed to limit, the 

ability of the Attorney General to present such evidence 

to a grand jury or to share such evidence with potential 

witnesses or defendants in the course of an ongoing 

criminal investigation. 

‘‘(D) AVAILABILITY TO GOVERNMENT AGENCIES.— 

‘‘(i) IN GENERAL.—Without the loss of its status 

as confidential in the hands of the Commission, all 

information referred to in subparagraph (A) may, in 

the discretion of the Commission, when determined 

by the Commission to be necessary to accomplish the 

purposes of this Act and to protect investors, be made 

available to— 

‘‘(I) the Attorney General of the United States; 


‘‘(II) an appropriate regulatory authority; 


‘‘(III) a self-regulatory organization; 


‘‘(IV) a State attorney general in connection 


with any criminal investigation; 

‘‘(V) any appropriate State regulatory 

authority; 

‘‘(VI) the Public Company Accounting Oversight Board; 

‘‘(VII) a foreign securities authority; and 

‘‘(VIII) a foreign law enforcement authority. 

‘‘(ii) CONFIDENTIALITY.— 

‘‘(I) IN GENERAL.—Each of the entities 

described in subclauses (I) through (VI) of clause 

(i) shall maintain such information as confidential 

in accordance with the requirements established 

under subparagraph (A). 

‘‘(II) FOREIGN AUTHORITIES.—Each of the entities described in subclauses (VII) and (VIII) of 

clause (i) shall maintain such information in 

accordance with such assurances of confidentiality 

as the Commission determines appropriate. 

‘‘(3) RIGHTS RETAINED.—Nothing in this section shall be 

deemed to diminish the rights, privileges, or remedies of any 

whistleblower under any Federal or State law, or under any 

collective bargaining agreement. 

‘‘(i) PROVISION OF FALSE INFORMATION.—A whistleblower shall 

not be entitled to an award under this section if the whistleblower— 

‘‘(1) knowingly and willfully makes any false, fictitious, 

or fraudulent statement or representation; or 

‘‘(2) uses any false writing or document knowing the writing 

or document contains any false, fictitious, or fraudulent statement or entry. 

‘‘(j) RULEMAKING AUTHORITY.—The Commission shall have the 

authority to issue such rules and regulations as may be necessary 
H. R. 4173—473 

or appropriate to implement the provisions of this section consistent 

with the purposes of this section.’’. 

(b) PROTECTION FOR EMPLOYEES OF NATIONALLY RECOGNIZED 

STATISTICAL RATING ORGANIZATIONS.—Section 1514A(a) of title 18, 

United States Code, is amended— 

(1) by inserting ‘‘or nationally recognized statistical rating 

organization (as defined in section 3(a) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78c),’’ after ‘‘78o(d)),’’; and 

(2) by inserting ‘‘or nationally recognized statistical rating 

organization’’ after ‘‘such company’’. 

(c) SECTION 1514A OF TITLE 18, UNITED STATES CODE.— (1) STATUTE OF LIMITATIONS; JURY TRIAL.—Section 

1514A(b)(2) of title 18, United States Code, is amended— 

(A) in subparagraph (D)— 

(i) by striking ‘‘90’’ and inserting ‘‘180’’; and 

(ii) by striking the period at the end and inserting 

‘‘, or after the date on which the employee became 

aware of the violation.’’; and 

(B) by adding at the end the following: 

‘‘(E) JURY TRIAL.—A party to an action brought under 

paragraph (1)(B) shall be entitled to trial by jury.’’. 

(2) PRIVATE SECURITIES LITIGATION WITNESSES; NONENFORCEABILITY; INFORMATION.—Section 1514A of title 18, 

United States Code, is amended by adding at the end the 

following: 

‘‘(e) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING 

RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.— ‘‘(1) WAIVER OF RIGHTS AND REMEDIES.—The rights and 

remedies provided for in this section may not be waived by 

any agreement, policy form, or condition of employment, 

including by a predispute arbitration agreement. 

‘‘(2) PREDISPUTE ARBITRATION AGREEMENTS.—No predispute 

arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.’’. 

(d) STUDY OF WHISTLEBLOWER PROTECTION PROGRAM.— (1) STUDY.—The Inspector General of the Commission shall 

conduct a study of the whistleblower protections established 

under the amendments made by this section, including— 

(A) whether the final rules and regulation issued under 

the amendments made by this section have made the 

whistleblower protection program (referred to in this subsection as the ‘‘program’’) clearly defined and user-friendly; 

(B) whether the program is promoted on the website 

of the Commission and has been widely publicized; 

(C) whether the Commission is prompt in— 

(i) responding to— 

(I) information provided by whistleblowers; 

and 

(II) applications for awards filed by whistleblowers; 

(ii) updating whistleblowers about the status of 

their applications; and 

(iii) otherwise communicating with the interested 

parties; 

(D) whether the minimum and maximum reward levels 

are adequate to entice whistleblowers to come forward with 
H. R. 4173—474 

information and whether the reward levels are so high 

as to encourage illegitimate whistleblower claims; 

(E) whether the appeals process has been unduly 

burdensome for the Commission; 

(F) whether the funding mechanism for the Investor 

Protection Fund is adequate; 

(G) whether, in the interest of protecting investors 

and identifying and preventing fraud, it would be useful 

for Congress to consider empowering whistleblowers or 

other individuals, who have already attempted to pursue 

the case through the Commission, to have a private right 

of action to bring suit based on the facts of the same 

case, on behalf of the Government and themselves, against 

persons who have committee securities fraud; 

(H)(i) whether the exemption under section 552(b)(3) 

of title 5 (known as the Freedom of Information Act) established in section 21F(h)(2)(A) of the Securities Exchange 

Act of 1934, as added by this Act, aids whistleblowers 

in disclosing information to the Commission; 

(ii) what impact the exemption described in clause 

(i) has had on the ability of the public to access information 

about the regulation and enforcement by the Commission 

of securities; and 

(iii) any recommendations on whether the exemption 

described in clause (i) should remain in effect; and 

(I) such other matters as the Inspector General deems 

appropriate. 

(2) REPORT.—Not later than 30 months after the date of 

enactment of this Act, the Inspector General shall— 

(A) submit a report on the findings of the study 

required under paragraph (1) to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House; and 

(B) make the report described in subparagraph (A) 

available to the public through publication of the report 

on the website of the Commission. 

SEC. 923. CONFORMING AMENDMENTS FOR WHISTLEBLOWER PROTECTION. 

(a) IN GENERAL.— (1) SECURITIES ACT OF 1933.—Section 20(d)(3)(A) of the Securities Act of 1933 (15 U.S.C. 77t(d)(3)(A)) is amended by 

inserting ‘‘and section 21F of the Securities Exchange Act of 

1934’’ after ‘‘the Sarbanes-Oxley Act of 2002’’. 

(2) INVESTMENT COMPANY ACT OF 1940.—Section 42(e)(3)(A) 

of the Investment Company Act of 1940 (15 U.S.C. 80a– 

41(e)(3)(A)) is amended by inserting ‘‘and section 21F of the 

Securities Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley 

Act of 2002’’. 

(3) INVESTMENT ADVISERS ACT OF 1940.—Section 209(e)(3)(A) 

of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

9(e)(3)(A)) is amended by inserting ‘‘and section 21F of the 

Securities Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley 

Act of 2002’’. 

(b) SECURITIES EXCHANGE ACT.— (1) SECTION 21.—Section 21(d)(3)(C)(i) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(C)(i)) is amended