70488 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 

1Pub. L. 111–203, § 922(a), 124 Stat 1841 (2010). 

2See Dodd Frank sec. 922(d)(1), which specifies 

that a study of the whistleblower program by the 

Inspector General of the Commission shall consider 

whether the final rules and regulations have made 

the program ‘‘clearly defined and user-friendly.’’ 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34–63237; File No. S7–33–10] 

RIN 3235–AK78 

Proposed Rules for Implementing the 

Whistleblower Provisions of Section 

21F of the Securities Exchange Act of 

1934 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Proposed rule. 

SUMMARY: The Commission is proposing 

rules and forms to implement Section 

21F of the Securities Exchange Act of 

1934 (‘‘Exchange Act’’) entitled 

‘‘Securities Whistleblower Incentives 

and Protection’’ and seeking comment 

thereon. The Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

enacted on July 21, 2010 (‘‘DoddFrank’’), established a whistleblower 

program that requires the Commission 

to pay an award, under regulations 

prescribed by the Commission and 

subject to certain limitations, to eligible 

whistleblowers who voluntarily provide 

the Commission with original 

information about a violation of the 

Federal securities laws that leads to the 

successful enforcement of a covered 

judicial or administrative action, or a 

related action. Dodd-Frank also 

prohibits retaliation by employers 

against individuals that provide the 

Commission with information about 

potential securities violations. 

DATES: Comments should be submitted 

on or before December 17, 2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–33–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–33–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: In 

the Division of Enforcement: Sarit Klein 

(202) 551–4577. In the Office of the 

General Counsel: Brian A. Ochs (202) 

551–5067, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 922 of Dodd-Frank added new 

Section 21F to the Exchange Act, 

entitled ‘‘Securities Whistleblower 

Incentives and Protection.’’ 1 Section 

21F directs that the Commission pay 

awards, subject to certain limitations 

and conditions, to whistleblowers who 

voluntarily provide the Commission 

with original information about a 

violation of the securities laws that 

leads to a successful enforcement of an 

action brought by the Commission that 

results in monetary sanctions exceeding 

$1,000,000, and of certain related 

actions. 

We are proposing Regulation 21F to 

implement Section 21F of the Exchange 

Act. As described in detail below, the 

rules contained in proposed Regulation 

21F define certain terms critical to the 

operation of the Whistleblower Program, 

outline the procedures for applying for 

awards and the Commission’s 

procedures for making decisions on 

claims, and generally explain the scope 

of the whistleblower program to the 

public and to potential whistleblowers. 

In this proposal, we have taken several 

steps to address Congress’s suggestion 

that the Commission’s whistleblower 

rules be clearly defined and userfriendly.2 First, to the extent possible, 

we have tried to adopt a plain English 

approach in writing the rules contained 

in Regulation 21F. Second, Regulation 

21F as proposed would provide a 

complete and self-contained set of rules 

relating to the whistleblower program. 

This means that in some places, we 

have proposed rules within the 

Regulation that largely restate key 

provisions of the statute. Although we 

recognize that this approach leads to 

some duplication between the statue 

and the rules, we believe that overall it 

will assist potential whistleblowers and 

add clarity, by providing in one place 

all the relevant provisions applicable to 

whistleblower claims. 

In fashioning these proposed rules, 

the Commission has considered and 

weighed a number of potentially 

competing interests that are presented 

in implementing the statute. Among 

them was the potential for the monetary 

incentives provided to whistleblowers 

by Section 21F of the Exchange Act to 

reduce the effectiveness of a company’s 

existing compliance, legal, audit and 

similar internal processes for 

investigating and responding to 

potential violations of the Federal 

securities laws. With this possible 

tension in mind, we have included 

provisions in the proposed rules 

intended not to discourage 

whistleblowers who work for companies 

that have robust compliance programs 

to first report the violation to 

appropriate company personnel, while 

at the same time preserving the 

whistleblower’s status as an original 

source of the information and eligibility 

for an award. At the same time, the 

proposed rules would not prohibit a 

whistleblower in a compliance function 

from reporting information to the 

Commission where the company did not 

provide the information to the 

Commission within a reasonable time or 

acted in bad faith. 

Another important policy issue raised 

by the statute is the potential for the 

monetary incentives provided by 

Section 21F to invite submissions from 

attorneys, independent auditors, and 

compliance personnel who may attempt 

to use information they obtain through 

their positions to make whistleblower 

claims. This exclusion focuses on those 

groups with established professional 

obligations that play a critical role in 

achieving compliance with the Federal 

securities laws. Our proposed rules 

include certain exclusions for these 

professionals and others under the 

definition of ‘‘independent knowledge,’’ 

and we seek comment on whether the 

proposed exclusions are appropriate 

and whether they should be extended to 

other types of privileged 

communications or other types of 

professionals who frequently have 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 70489 

3 15 U.S.C. 78u–6(a)(6). 

4 15 U.S.C. 78u–6(h)(2). 5S. Rep. No. 111–176 at 110 (2010). 6 15 U.S.C. 78u–6(b)(1). 

access to confidential client 

information. 

Finally, we have attempted to 

maximize the submission of highquality tips and to enhance the utility of 

the information reported to the 

Commission. More frequent reporting of 

high-quality information promotes 

greater deterrence by enhancing the 

efficiency and effectiveness of the 

Commission’s enforcement program. To 

achieve this goal, the proposed rules 

would impose certain procedural 

requirements designed to deter false 

submissions, including a requirement 

that the information be submitted under 

penalty of perjury, and requiring an 

anonymous whistleblower to be 

represented by counsel who must certify 

to the Commission that he or she has 

verified the whistleblower’s identity. 

II. Description of the Proposed Rules 

A. Proposed Rule 21F–1—General 

Proposed Rule 21F–1 provides a 

general, plain English description of 

Section 21F of the Exchange Act. It sets 

forth the purposes of the rules and states 

that the Commission’s Whistleblower 

Office administers the whistleblower 

program. In addition, the proposed rule 

states that, unless expressly provided 

for in the rules, no person is authorized 

to make any offer or promise, or 

otherwise to bind the Commission with 

respect to the payment of an award or 

the amount thereof. 

B. Proposed Rule 21F–2—Definition of a 

Whistleblower 

The term ‘‘whistleblower’’ is defined 

in Section 21F(a)(6) of the Exchange 

Act.3 Consistent with this language, 

Proposed Rule 21F–2(a) would define a 

whistleblower as an individual who, 

alone or jointly with others, provides 

information to the Commission relating 

to a potential violation of the securities 

laws. A whistleblower must be a natural 

person; a company or another entity is 

not eligible to receive a whistleblower 

award. This definition tracks the 

statutory definition of a 

‘‘whistleblower,’’ except that the 

proposed rule uses the term ‘‘potential 

violation.’’ Because the statute requires 

the Commission to afford confidential 

treatment to information ‘‘which could 

reasonably be expected to reveal the 

identity of a whistleblower,’’ 4 it is 

important to be able to determine 

whether a person is a ‘‘whistleblower’’ at 

the time he or she submits information 

to the Commission. If the term 

‘‘whistleblower’’ were defined to include 

only individuals who provide the 

Commission with information about 

actual, proven securities violations, then 

either the Commission would be 

required to determine at the time 

information is submitted whether the 

alleged conduct constitutes a violation 

of the securities laws, or the status of 

the person as a ‘‘whistleblower’’ would 

be unknown. We do not believe that this 

is the intended result. 

In addition, use of the term ‘‘potential 

violation’’ makes clear that the 

whistleblower anti-retaliation 

protections set forth in Section 21F(h)(1) 

of the Exchange Act do not depend on 

an ultimate adjudication, finding or 

conclusion that conduct identified by 

the whistleblower constituted a 

violation of the securities laws. As 

noted in the Senate Report 

accompanying the legislation, ‘‘[t]he 

Whistleblower Program aims to 

motivate those with inside knowledge to 

come forward and assist the 

Government;’’ 5 affording broad antiretaliation protections to whistleblowers 

furthers this legislative purpose. 

Paragraph (b) of Proposed Rule 21F– 

2 would further make clear that the antiretaliation protections set forth in 

Section 21F(h)(1) of the Exchange Act 

apply irrespective of whether a 

whistleblower satisfies all the 

procedures and conditions to qualify for 

an award under the Commission’s 

whistleblower program. We believe the 

statute extends the protections against 

employment retaliation in Section 

21F(h)(1) to any individual who 

provides information to the Commission 

about potential violations of the 

securities laws regardless of whether the 

whistleblower fails to satisfy all of the 

requirements for award consideration 

set forth in the Commission’s rules. 

Proposed Rule 21F–2(c) makes clear, 

however, that, in order to be eligible to 

be considered for an award, a 

whistleblower must submit original 

information to the Commission in 

accordance with all the procedures and 

conditions described in Proposed Rules 

21F–4, 21F–8, and 21F–9. 

Request for Comment: 

1. In other provisions of these 

Proposed Rules—e.g., Proposed Rule 

21F–15—we propose that 

whistleblowers not be paid awards 

based on monetary sanctions arising 

from their own misconduct, based on 

the notion that the statue is not 

intended to reward persons for blowing 

the whistle on their own misconduct. 

Consistent with this approach, should 

we define the term ‘‘whistleblower’’ to 

expressly state that it is an individual 

who provides information about 

potential violations of the securities 

laws ‘‘by another person’’? 

C. Proposed Rule 21F–3—Payment of 

Award 

Proposed Rule 21F–3 summarizes the 

general requirements for the payment of 

awards set forth in Section 21F(b)(1) of 

the Exchange Act.6 As set forth in the 

statute, paragraph (a) states that, subject 

to the eligibility requirements in the 

Regulations, the Commission will pay 

an award or awards to one or more 

whistleblowers who voluntarily provide 

the Commission with original 

information that leads to the successful 

enforcement by the Commission of a 

Federal court or administrative action in 

which the Commission obtains 

monetary sanctions totaling more than 

$1,000,000. Paragraph (b) of this 

proposed rule describes the 

circumstances under which the 

Commission will also pay an award to 

the whistleblower based upon monetary 

sanctions that are collected from a 

‘‘related action.’’ Payment based on the 

‘‘related action’’ will occur if the 

whistleblower’s original information led 

the Commission to obtain monetary 

sanctions totaling more than $1,000,000, 

the related action is based upon the 

same original information that led to the 

successful enforcement of the 

Commission action, and the related 

action is brought by the Attorney 

General of the United States, an 

appropriate regulatory agency, a selfregulatory organization, or a state 

attorney general in a criminal case. 

Paragraph (c) of Proposed Rule 21F– 

3 explains that the Commission must 

determine whether the original 

information that the whistleblower gave 

to the Commission also led to the 

successful enforcement of a related 

action using the same criteria used to 

evaluate awards for Commission 

actions. To help make this 

determination, the Commission may 

seek confirmation of the relevant facts 

regarding the whistleblower’s assistance 

from the authority that brought the 

related action. However, the proposed 

rule states that the Commission will 

deny an award to a whistleblower if the 

Commission determines that the criteria 

for an award are not satisfied or if the 

Commission is unable to obtain 

sufficient and reliable information about 

the related action. 

Paragraph (d) provides that the 

Commission will not make an award in 

a related action if an award already has 

been granted to the whistleblower by 

the Commodity Futures Trading 

Commission (‘‘CFTC’’) for that same 


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70490 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 

7 7 U.S.C. 26. 

8See Restatement Second of Judgments, Sec. 29 

cmt. b (explaining that ‘‘[a] party who has had a full 

and fair opportunity to litigate an issue has been 

accorded the elements of due process’’ and ‘‘there 

is no good reason for refusing to treat the issue as 

settled so far as he is concerned’’ in subsequent 

actions). 

9 15 U.S.C. 78u–6(b)(1). 

10 Various books and records provisions of the 

Federal securities laws and rules generally require 

regulated entities to furnish records to the 

Commission upon request. See, e.g., Section 17(a) 

and Rule 17a–4(j) under the Exchange Act (15 

U.S.C. 78q(a) and 17 CFR 240.17a–4(j)). 

11The list of authorities set forth in the proposed 

rule does not include an employer’s personnel 

(such as legal counsel, compliance, or audit staff) 

conducting an internal investigation, compliance 

review, audit, or similar function. Thus, Proposed 

Rule 21F–4(a)(1) would credit a whistleblower with 

‘‘voluntarily’’ providing information if the 

individual were to approach the Commission staff 

after being questioned about possible violations by 

such persons, unless, as noted, the individual’s 

information is within the scope of a request, 

inquiry, or demand directed to the employer by one 

of the designated authorities . The objective of this 

approach is to implement Section 21F in a way that 

encourages and permits persons with knowledge of 

securities violations to come forward to the 

Commission, other responsible Government 

authorities, and other bodies of an official nature. 

We have included other provisions in these 

proposed rules that are intended to facilitate the 

operation of company compliance processes, audits, 

and internal investigations. See Proposed Rules 

21F–4(b)(4) and (b)(7). Further, because there is no 

assurance that an employer will ultimately disclose 

to the Commission potential violations uncovered 

in the course of an internal investigation or similar 

process, a rule that precluded employees with 

knowledge of unlawful conduct from coming 

forward as whistleblowers merely because they 

were questioned about the conduct by company 

personnel could undermine the purposes of Section 

21F. 

12Production of documents or information in a 

timely manner turns on the production schedule 

required, or otherwise agreed to, by the requesting 

authority. Further, employees will not be permitted 

to thwart the aim of Section 21F by causing an 

employer to fail to respond to a request in a timely 

manner, and then claiming that their whistleblower 

submission was therefore made ‘‘voluntarily’’ within 

the meaning of the proposed rule. 

13See S. Rep. No. 111–176 at 110 (2010) (‘‘The 

Whistleblower Program aims to motivate those with 

inside knowledge to come forward and assist the 

Government to identify and prosecute persons who 

have violated securities laws * * *.’’). 

action pursuant to its whistleblower 

award program under section 23 of the 

Commodity Exchange Act.7 Rule 21F– 

3(d) also provides that, if the CFTC has 

previously denied an award in a related 

action, the whistleblower will be 

collaterally estopped from relitigating 

any issues before the Commission that 

were necessary to the CFTC’s denial. 

This provision serves two purposes. 

First, it would ensure that a 

whistleblower will not obtain a double 

recovery on the same related action. For 

example, if the CFTC makes an award 

of 10 percent to 30 percent on a criminal 

action brought by the U.S. Department 

of Justice, the whistleblower would be 

precluded from obtaining a second 

recovery of 10 percent to 30 percent 

from the SEC on the same action. Any 

other reading of the interplay of the SEC 

and CFTC whistleblower award 

provisions—which were both 

established by Dodd-Frank and which 

are substantially identical in their 

substantive terms—would produce the 

highly anomalous result of allowing the 

whistleblower to effectively receive a 20 

percent minimum to 60 percent 

maximum recovery on the same related 

action. The SEC and CFTC 

whistleblower provisions, however, 

embody a clear Congressional 

determination that a whistleblower 

award on a successful action should lie 

within the 10 percent to 30 percent 

range. 

Second, this provision would ensure 

that once the CFTC decides an issue of 

fact or law necessary to its 

determination to deny a whistleblower 

an award on a related action, the 

whistleblower will be precluded from 

relitigating the same issue before the 

Commission. For example, if the CFTC 

determines that the whistleblower’s 

information did not lead to the 

successful enforcement of a related 

action, the whistleblower may not 

attempt to circumvent this adverse 

determination by relitigating the same 

issue before the Commission. The 

application of collateral estoppel 

principles in these circumstances would 

promote the orderly and consistent 

resolution of a whistleblower’s claims, 

and would ensure that the subset of 

whistleblowers who can pursue both 

SEC and CFTC award claims on a 

related action are not unfairly afforded 

‘‘two bites at the apple’’ relative to the 

majority of whistleblowers who would 

not have this dual opportunity.8

D. Proposed Rule 21F–4—Other 

Definitions 

Although the statute defines several 

relevant terms, Proposed Rule 21F–4 

would define some additional terms that 

are important to understanding the 

scope of the whistleblower award 

program, in order to provide greater 

clarity and certainty about the operation 

and scope of the program. 

Proposed Rule 21F–4(a)—Voluntary 

submission of information. 

Under Section 21F(b)(1) of the 

Exchange Act,9 whistleblowers are 

eligible for awards only when they 

provide original information to the 

Commission ‘‘voluntarily.’’ Proposed 

Rule 21F–4(a)(1) would define a 

submission as voluntary if a 

whistleblower provides the Commission 

with information before receiving any 

formal or informal request, inquiry, or 

demand from the Commission, 

Congress, any other Federal, State or 

local authority, any self-regulatory 

organization, or the Public Company 

Accounting Oversight Board about a 

matter to which the information in the 

whistleblower’s submission is relevant. 

The first step in most Commission 

enforcement investigations is the 

opening of an informal inquiry. At this 

stage, because the staff has not yet been 

granted the authority to issue 

subpoenas, information is frequently 

requested from companies and members 

of the public on a ‘‘voluntary’’ basis in 

the sense that there is generally no legal 

requirement that the recipient of the 

request provide the information or even 

respond to the request. After a formal 

investigation is opened and the staff 

obtains subpoena authority, the staff 

retains discretion to seek documents or 

other information without legal 

compulsion, and often does so. 

Proposed Rule 21F–4(a)(1) would 

make clear that, in order to have acted 

‘‘voluntarily’’ under the statute, a 

whistleblower must do more than 

merely provide the Commission with 

information that is not compelled by 

subpoena (or by a court order following 

a Commission action to enforce a 

subpoena) or by other applicable law.10

Rather, the whistleblower or his 

representative (such as an attorney) 

must come forward with the 

information before receiving any formal 

or informal request, inquiry, or demand 

from the Commission staff or from any 

other authority described in the 

proposed rule about a matter to which 

the whistleblower’s information is 

relevant.11

A request, inquiry, or demand that is 

directed to an employer is also 

considered to be directed to employees 

who possess the documents or other 

information that is within the scope of 

the request to the employer. 

Accordingly, a subsequent 

whistleblower submission from any 

such employee will not be considered 

‘‘voluntary’’ for purposes of the rule, and 

the employee will not be eligible for 

award consideration, unless the 

employer fails to provide the 

employee’s documents or information to 

the requesting authority in a timely 

manner.12

This approach is consistent with the 

statutory purpose of creating a strong 

incentive for whistleblowers to come 

forward early with information about 

possible violations of the securities laws 

rather than wait until Government or 

other official investigators ‘‘come 

knocking on the door.’’ 13 This approach 

is also consistent with the approach 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 70491 

14See United States ex rel. Barth v. Ridgedale 

Electric, Inc., 44 F.3d 699 (8th Cir. 1994); United 

States ex rel. Paranich v. Sorgnard, 396 F.3d 326 

(3d Cir. 2005); United States ex rel. Fine v. Chevron, 

USA, Inc., 72 F.3d 740 (9th Cir. 1995), cert. denied, 

517 U.S.1233 (1996) (rejecting argument that 

provision of information to the Government is 

always voluntary unless compelled by subpoena) . 

The qui tam provisions of the False Claims Act 

include a ‘‘public disclosure bar,’’ which, as recently 

amended, requires a court to dismiss a private 

action or claim if substantially the same allegations 

or transactions as alleged in the action or claim 

were publicly disclosed in certain fora, unless the 

Government opposes dismissal or the plaintiff is an 

‘‘original source’’ of the information. 31 U.S.C. 

3730(e)(4). An ‘‘original source’’ is further defined, 

in part, with reference to whether the plaintiff 

‘‘voluntarily’’ disclosed the information to the 

Government before filing suit. Id. Because the qui 

tam provisions of the False Claims Act have played 

a significant role in the development of 

whistleblower law generally, and because some of 

the terminology used by Congress in Section 21F 

has antecedents in the False Claims Act, precedent 

under the False Claims Act can provide helpful 

guidance in the interpretation of Section 21F of the 

Exchange Act. At the same time, because the False 

Claims Act and Section 21F serve different 

purposes are structured differently, and the two 

statutes may use the same words in different 

contexts, we do not view False Claims Act 

precedent as necessarily controlling or authoritative 

in all circumstances for purposes of Section 21F. 

15See United States ex rel. Biddle v. Board of 

Trustees of The Leland Stanford, Jr. University, 161 

F.3d 533 (9th Cir. 1998), cert. denied, 526 U.S. 1066 

(1999) (government employee whose duties 

required that he report knowledge of contract fraud 

to superiors could not ‘‘voluntarily’’ supply 

information to government for purposes of False 

Claims Act because employee was obligated to alert 

superiors to contractor wrongdoing); United States 

ex rel. Schwedt v. Planning Research Corp., 39 F. 

Supp. 2d 28 (D.D.C. 1999) (same). 

16 15 U.S.C. 78u–6(c)(2). 

17See Biddle, 161 F.3d 533; Schwedt, 39 F. Supp. 

2d 28. 

18 15 U.S.C. 78u–6(a)(3). 

19We would interpret the term ‘‘judicial or 

administrative hearing’’ as used in Section 21F(a)(3) 

to include hearings in arbitration proceedings. 

Federal courts have taken in 

determining whether a private plaintiff, 

suing on behalf of the Government 

under the qui tam provisions of the 

False Claims Act, ‘‘voluntarily’’ provided 

information about the false or 

fraudulent claims to the Government 

before filing suit.14

Disclosure to the Government should 

also not be considered voluntary if the 

individual has a clear duty to report 

violations of the type at issue.15 Thus, 

for example, Section 21F(c)(2) of the 

statute 16 prohibits awards to members, 

officers, or employees of an appropriate 

regulatory agency, the Department of 

Justice, a self-regulatory organization, 

the Public Company Accounting 

Oversight Board, a law enforcement 

organization, or to persons who obtain 

their information as a result of an audit 

of financial statements and who would 

be subject to the requirements of Section 

10A of the Exchange Act. The 

Commission anticipates that there may 

be other similarly-situated persons who 

are under a pre-existing legal duty to 

report information about violations to 

the Commission or to any of the other 

authorities described in subsection 

(a)(1) of the proposed rule. Proposed 

Rule 21F–4(a)(2) provides that 

submissions from such individuals will 

not be considered voluntary for 

purposes of Section 21F. For example, 

a Government contracting officer would 

not be considered for a whistleblower 

award if the officer discovered and 

reported fraud on a Government 

contract that was material to the 

contractor’s earnings.17 Depending on 

the particular regulations or other 

authorities that governed, a city officer 

or employee with responsibility for the 

city’s pension fund might have a preexisting legal duty to report fraud in 

connection with the fund’s management 

or financial reporting to appropriate city 

authorities. Proposed Rule 21F–4(a)(2) 

also includes a similar exclusion for 

information that the whistleblower is 

contractually obligated to report to the 

Commission or to other authorities. This 

exclusion is intended to preclude 

awards to persons who provide 

information pursuant to preexisting 

agreements that obligate them to assist 

Commission staff or other investigative 

authorities. 

Request for Comment: 

2. Does Proposed Rule 21F–4(a)(1) 

appropriately define the circumstances 

when a whistleblower should be 

considered to have acted ‘‘voluntarily’’ 

in providing information about 

securities law violations to the 

Commission? Are there other 

circumstances not clearly included that 

should be in the rule? 

3. Should the Commission exclude 

from the definition of ‘‘voluntarily’’ 

situations where the information was 

received from a whistleblower after he 

received a request, inquiry, or demand 

from a foreign regulatory authority, law 

enforcement organization or selfregulatory organization? Similarly, 

should the Commission exclude from 

the definition of ‘‘voluntarily’’ situations 

where the information was received 

from a whistleblower where the 

individual was under a pre-existing 

legal duty to report the information to 

a foreign regulatory authority, law 

enforcement organization or selfregulatory organization? 

4. Is it appropriate for the proposed 

rule to consider a request or inquiry 

directed to an employer to be directed 

at individual employees who possess 

the documents or other information that 

is within the scope of the request? 

Should the class of persons who are 

covered by this rule be narrowed or 

expanded? Will the carve-out that 

permits such an employee to become a 

whistleblower if the employer fails to 

disclose the information the employee 

provided in a timely manner promote 

compliance with the law and the 

effective operation of Section 21F? 

5. The standard described in Proposed 

Rule 21F–4(a)(1) would credit an 

individual with acting ‘‘voluntarily’’ in 

certain circumstances where the 

individual was aware of fraudulent 

conduct for an extended period of time, 

but chose not to come forward as a 

whistleblower until after he became 

aware of a governmental investigation or 

examination (such as by observing 

document requests being served on his 

employer or colleagues, but before he 

received an inquiry, request, or demand 

himself, assuming that he was not 

within the scope of an inquiry directed 

to his employer). Is this an appropriate 

result, and, if not, how should the 

proposed rule be modified to account 

for it? 

6. Is the exclusion set forth in 

Proposed Rule 21F–4(a)(2) for 

information provided pursuant to a preexisting legal or contractual duty to 

report violations appropriate? Should 

specific circumstances where there are 

pre-existing duties to report violations 

to investigating authorities be set forth 

in the rule, and if so, what are they? For 

example, should the rule preclude 

submissions from all Government 

employees? 

Proposed Rule 21F–4(b)—Original 

Information. 

Paragraph (1) of Proposed Rule 21F– 

4(b) begins with the definition of 

‘‘original information’’ set forth in 

Section 21F(a)(3) of the Exchange Act.18

‘‘Original information’’ means 

information that is derived from the 

whistleblower’s independent knowledge 

or analysis; is not already known to the 

Commission from any other source, 

unless the whistleblower is the original 

source of the information; and is not 

exclusively derived from an allegation 

made in a judicial or administrative 

hearing,19 in a governmental report, 

hearing, audit, or investigation, or from 

the news media, unless the 

whistleblower is a source of the 

information. Paragraph (1) also requires 

that ‘‘original information’’ be provided 

to the Commission for the first time after 

July 21, 2010 (the date of enactment of 

Dodd-Frank). Although Dodd-Frank 

authorizes the Commission to pay 

whistleblower awards on the basis of 

original information that is submitted in 

writing prior to the effective date of 

final rules implementing Section 21F 


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20Section 924(b) of Dodd-Frank directs that 

‘‘Information provided to the Commission in writing 

by a whistleblower shall not lose the status of 

original information * * * solely because the 

whistleblower provided the information prior to the 

effective date of the regulations, if the information 

is provided by the whistleblower after the effective 

date of this subtitle.’’ 

21Until this year, the ‘‘public disclosure bar’’ 

provisions of the False Claims Act defined an 

‘‘original source’’ of information, in part, as ‘‘an 

individual who [had] direct and independent 

knowledge of the allegations of the information on 

which the allegations [were] based * * *. ’’ 

31 U.S.C. 3130(e)(4) (prior to 2010 amendments). 

Courts interpreting these terms generally defined 

‘‘direct knowledge’’ to mean first-hand knowledge 

from the relator’s own work and experience, with 

no intervening agency. E.g., United States ex rel. 

Fried v. West Independent School District, 527 F.3d 

439 (5th Cir. 2008); United States ex rel. Paranich 

v. Sorgnard, 396 F.3d 326 (3d Cir. 2005). See 

generally John T. Boese, Civil False Claims and Qui 

Tam Actions sec. 4.02[D][2] (citing cases). Earlier 

this year, Congress amended the ‘‘public disclosure 

bar’’ to, among other things, remove the requirement 

that a relator have ‘‘direct and independent 

knowledge’’ of information, replacing that standard 

with one that instead requires only ‘‘knowledge that 

is independent and materially adds to the publiclydisclosed allegations or transactions * * *’’ 31 

U.S.C. 3130(e)(4), Pub. L. 111–148 § 10104(h)(2), 

124 Stat. 901 (Mar. 23, 2010). Many practitioners 

have observed that, with this amendment, the False 

Claims Act now permits qui tam actions based upon 

‘‘second-hand knowledge.’’ E.g., Robert T. Rhoad 

and Matthew T. Fornataro, Whistling While They 

Work: Limiting Exposure in the Face of PPACA’s 

Invitation to Employee Whistleblower Lawsuits, 22 

Health Lawyer 19 (Aug. 2010). 

22 15 U.S.C. 78u–6(a)(3)(A). 

23See Proposed Rule 21F–4(b)(4)(i). 

24See Model Rules of Professional Conduct 

1.6(b), 1.13(c). 

(assuming that all of the other 

requirements for an award are met), 

Dodd-Frank does not authorize the 

Commission to apply Section 21F 

retroactively to pay awards based upon 

information submitted before the 

effective date of the statute.20

Paragraphs (2) through (7) of Proposed 

Rule 21F–4(b) define some of the 

constituent terms in the definition of 

‘‘original information,’’ so as to further 

describe when a whistleblower provides 

‘‘original information.’’ 

Paragraph (2) of Proposed Rule 21F– 

4(b) defines ‘‘independent knowledge’’ 

as factual information in the 

whistleblower’s possession that is not 

obtained from publicly available 

sources. Publicly available sources may 

include both sources that are widely 

disseminated (such as corporate press 

releases and filings, media reports, and 

information on the Internet), and 

sources that, though not widely 

disseminated, are generally available to 

the public (such as court filings and 

documents obtained through Freedom 

of Information Act requests). 

Importantly, the proposed definition of 

‘‘independent knowledge’’ does not 

require that a whistleblower have direct, 

first-hand knowledge of potential 

violations. Instead, knowledge may be 

obtained from any of the 

whistleblower’s experiences, 

observations, or communications 

(subject to the exclusion for knowledge 

obtained from public sources). Thus, for 

example, under Proposed Rule 21F– 

4(b)(2), a whistleblower would have 

‘‘independent knowledge’’ of 

information even if that knowledge 

derives from facts or other information 

that has been conveyed to the 

whistleblower by third parties.21

The Commission preliminarily 

believes that defining ‘‘independent 

knowledge’’ in this manner best 

effectuates the purposes of Section 21F. 

An individual may learn about potential 

violations of the securities laws without 

being personally involved in the 

conduct. If an individual voluntarily 

comes forward with such information, 

and the information leads the 

Commission to a successful enforcement 

action (as defined in Proposed Rule 

21F–4(c)), that individual should be 

eligible to receive a whistleblower 

award. 

Under Section 21F(a)(3)(A) of the 

Exchange Act,22 the original 

information provided by a 

whistleblower can include information 

that is derived from independent 

knowledge and also from independent 

‘‘analysis.’’ Proposed Rule 21F–4(b)(3) 

would define ‘‘independent analysis’’ to 

mean the whistleblower’s own analysis, 

whether done alone or in combination 

with others. The proposed rule thus 

recognizes that analysis—which may 

include academic or professional 

studies—can be the product of 

collaboration among two or more 

individuals. ‘‘Analysis’’ would mean the 

whistleblower’s examination and 

evaluation of information that may be 

generally available, but which reveals 

information that is not generally known 

or available to the public. This 

definition recognizes that there are 

circumstances where individuals can 

review publicly available information, 

and, through their additional evaluation 

and analysis, provide vital assistance to 

the Commission staff in understanding 

complex schemes and identifying 

securities violations. 

Proposed Rule 21F–4(b)(4) provides 

that information will not be considered 

to derive from an individual’s 

‘‘independent knowledge’’ or 

‘‘independent analysis’’ in seven 

circumstances. The first two exclusions 

apply to attorneys and to persons such 

as accountants and experts when they 

assist attorneys on client matters, 

because of the prominent role that 

attorneys play in all aspects of practice 

before the Commission and the special 

duties they owe to clients. The first 

proposed exclusion is for information 

that was obtained through a 

communication that is subject to the 

attorney-client privilege.23 Compliance 

with the Federal securities laws is 

promoted when individuals, corporate 

officers, and others consult with counsel 

about potential violations, and the 

attorney-client privilege furthers such 

consultation. This important benefit 

could be undermined if the 

whistleblower award program created 

monetary incentives for counsel to 

disclose information about potential 

securities violations that they learned of 

through privileged communications. 

The exception for information 

obtained through privileged attorneyclient communications would not apply 

in circumstances where the attorney is 

permitted to disclose the substance of a 

communication that would otherwise be 

privileged. This would include, for 

example, circumstances where the 

privilege has been waived, or where 

disclosure of confidential information to 

the Commission without the client’s 

consent is permitted pursuant to either 

17 CFR 205.3(d)(2) or the applicable 

state bar ethical rules.24

This exclusion is not intended to 

preclude an individual who has 

independent knowledge of facts 

indicating potential securities violations 

from becoming a whistleblower if that 

individual chooses to consult with an 

attorney. Facts in the possession of such 

an individual do not become privileged 

simply because he or she consulted with 

an attorney. Rather, this exclusion from 

independent knowledge or analysis only 

means that an attorney cannot make a 

whistleblower submission on his or her 

own behalf that is based upon 

information the attorney obtained 

through a privileged communication 

with a client. 

The second exclusion applies when a 

would-be whistleblower obtains 

information as a result of the legal 

representation of a client on whose 

behalf the whistleblower’s services, or 

the services of the whistleblower’s 

employer or firm, have been retained, 

and the person seeks to make a 

whistleblower submission for his or her 

own benefit. The second exclusion 

would, for example, preclude an 

attorney from using information 

obtained in connection with the 

attorney’s representation of a client to 

make a whistleblower submission for 

the attorney’s own benefit. This 

exclusion would not be limited to 

information obtained through privileged 


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25See Model Rule of Professional Conduct 1.6, 

comment 3 (‘‘The confidentiality rule * * * applies 

not only to matters communicated in confidence by 

the client but also to all information relating to the 

representation, whatever its source. A lawyer may 

not disclose such information except as authorized 

or required by the Rules of Professional Conduct or 

other law.). 

26Proposed Rule 21F–4(b)(4)(iii). 

27 15 U.S.C. 78u–6(c)(2)(C). 

28See 15 U.S.C. 78j–1. 

29See 17 CFR 240.17a–5(h)(2). 

30See 17 CFR 275.206(4)–2(a)(3)(ii)(C). 

31See AU Section 317, Illegal Acts by Clients. 

32This would include reviews performed by an 

independent public accountant of interim financial 

statements included in quarterly reports on Form 

10–Q (17 CFR 249.308(a)) pursuant to Rule 10– 

01(d) of Regulation S–X (17 CFR 210.10–01(d)). The 

Commission anticipates this exclusion would also 

apply to information gained through another 

engagement by the independent public accountant 

for the same client, given that the independent 

public accountant would generally already have an 

obligation to consider the information gained in the 

separate engagement in connection with the 

Commission-required engagement. 

33Proposed Rule 21F–4(b)(4)(iv). Under the 

Federal Whistleblower Protection Act, 5 U.S.C. 

2302(b)(8), a disclosure to a supervisor who is in 

a position to remedy the wrongdoing, is treated as 

a protected disclosure for purposes of the Federal 

Whistleblower Protection Act, 5 U.S.C. 2302(b)(8). 

E.g., Reid v. Merit Systems Protection Board, 508 

F.3d 674 (Fed. Cir. 2007); Hooven-Lewis v. Caldera, 

249 F.3d 259 (4th Cir. 2001). Borrowing and 

building upon this concept, the proposed rule 

would preclude such supervisors and similarlysituated others from seeking whistleblower awards 

based upon information they obtain when persons 

with knowledge of potential wrongdoing come to 

them in an effort to redress the violations. 

34Persons excluded under this provision would 

include those retained to assist in such processes; 

e.g., forensic accountants retained by outside 

counsel responsible for conducting an internal 

investigation. 

communications, but would instead 

extend to any information obtained by 

the attorney in the course and as a result 

of representation of the client. For 

example, under the proposed rule, an 

attorney who obtained evidence of 

securities violations through document 

discovery from an opposing party in 

litigation could not use that information 

to make a whistleblower submission on 

his or her own behalf. However, the 

attorney could use the information to 

make a submission on behalf of the 

client in whose litigation the discovery 

was obtained. The Commission believes 

that this limitation is generally 

consistent with attorneys’ ethical 

obligations,25 and is a reasonable 

measure to prevent creating financial 

incentives for attorneys to take undue 

advantage of clients. The language of the 

exclusion is also intended to apply to 

other members or employees of a firm 

in which the attorney works, as well as 

to other persons who are retained, or 

whose company or firm is retained, to 

perform services in relation to, or to 

assist, an attorney’s representation of a 

client (e.g., accountants and experts). As 

with the previous exclusion, this 

exclusion would not apply where the 

attorney is permitted to make a 

disclosure pursuant to 17 CFR 

205.3(d)(2), the applicable state bar 

ethical rules, or otherwise. 

The third proposed exclusion applies 

to persons who obtain information 

through the performance of an 

engagement required under the 

securities laws by an independent 

public accountant, if that information 

relates to a violation by the engagement 

client or the client’s directors, officers or 

other employees.26 Section 21F(c)(2)(C) 

of the Exchange Act excludes from 

award eligibility ‘‘any person who 

obtained the information provided to 

the Commission through an audit of a 

company’s financial statements, and 

making a whistleblower submission 

would be contrary to the requirements 

of Section 10A of the Exchange Act.’’ 27

Section 10A requires registered public 

accounting firms with respect to an 

audit of the issuer to include audit 

procedures to detect illegal acts.28 It also 

prescribes requirements for the auditor 

if the auditor detects or otherwise 

becomes aware of information 

indicating an illegal act, which in 

certain circumstances can include 

reporting directly to the Commission. In 

addition to these requirements, there are 

other Commission-required 

engagements by an independent public 

accountant, such as audits of brokerdealers 29 and custody exams of 

investment advisers,30 that require the 

external accountant to report instances 

of noncompliance. Professional 

standards for independent public 

accountants also prescribe 

responsibilities when a possible illegal 

act is detected.31

In light of these pre-existing 

requirements, and consistent with the 

role of an independent public 

accountant, we are proposing to exclude 

from the definitions of ‘‘independent 

knowledge and ‘‘independent analysis’’ 

any would-be whistleblowers whose 

information was gained through the 

performance of an engagement required 

under the securities laws by an 

independent public accountant.32 This 

proposed exclusion applies to the 

employees of the independent public 

accountant and would not apply to the 

client’s employees who perform an 

accounting function, even if they were 

interacting with the company’s outside 

auditor. This proposed exclusion only 

would apply if the information relates to 

a violation by the engagement client or 

the client’s directors, officers or other 

employees. It would not exclude 

information with respect to the 

independent public accountant’s 

performance of the engagement itself, 

such as a violation of the accountant’s 

requirements with respect to the 

engagement. 

The fourth proposed exclusion 

applies when a person with legal, 

compliance, audit, supervisory, or 

governance responsibilities for an entity 

receives information about potential 

violations, and the information was 

communicated to the person with the 

reasonable expectation that the person 

would take appropriate steps to cause 

the entity to respond to the violation.33

The fifth proposed exclusion is closely 

related, and applies any other time that 

information is obtained from or through 

an entity’s legal, compliance, audit, or 

similar functions or processes for 

identifying, reporting, and addressing 

potential non-compliance with 

applicable law.34 However, each of 

these two exclusions ceases to be 

applicable, with the result that an 

individual may be deemed to have 

‘‘independent knowledge,’’ and therefore 

may become a whistleblower, if the 

entity does not disclose the information 

to the Commission within a reasonable 

time or if the entity proceeds in bad 

faith. 

Compliance with the Federal 

securities laws is promoted when 

companies implement effective legal, 

audit, compliance, and similar 

functions. The rationale for these 

proposed exclusions is the concern that 

Section 21F not be implemented in a 

way that would create incentives for 

persons who obtain information through 

such functions, as well as other 

responsible persons who are informed 

of wrongdoing, to circumvent or 

undermine the proper operation of the 

entity’s internal processes for 

responding to violations of law. 

Accordingly, the proposed rule would 

limit the circumstances in which such 

persons may use that knowledge to 

become whistleblowers. This would 

include officers, directors, employees, 

and consultants who learn of potential 

violations as part of their corporate 

responsibilities in the expectation that 

they will take steps to address the 

violations, as well as persons who gain 

knowledge about misconduct otherwise 

from or through the various processes 

that companies employ to identify 

problems and advance compliance with 

legal standards. The latter group would 

include not only persons directly 

responsible for compliance-related 

processes, but other persons as well. For 


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35This proposed exclusion would not, however, 

apply to individuals with knowledge of potential 

violations who report their knowledge to 

supervisors, compliance or legal personnel. In fact, 

as is further explained below, such individuals 

would be given a 90-day grace period after reporting 

their information internally to make a 

whistleblower submission to the Commission and 

have their submission deemed effective as of the 

date of their internal report. 

36This provision does not impose new reporting 

requirements in addition to those already existing 

under the Federal securities laws. 

example, an employee who learns about 

potential violations only because a 

compliance officer questions him about 

the conduct, and not from any other 

source, would not be considered to have 

‘‘independent knowledge’’ for purposes 

of the proposed rule, and therefore 

could not become a whistleblower 

(unless, as is explained below, the 

company does not disclose the conduct 

to the Commission within a reasonable 

time or proceeds in bad faith).35

Internal compliance and similar 

functions, when effective, can constrain 

the opportunities for unlawful activity. 

In some cases, an entity’s compliance 

program will fail to lead the entity to 

respond appropriately to violations. 

Under the proposed rule, if the entity 

did not disclose the information to the 

Commission within a reasonable time or 

proceeded in bad faith, these exclusions 

would no longer apply, thereby making 

an individual who knows this 

undisclosed information eligible to 

become a whistleblower by providing 

‘‘independent knowledge’’ of the 

violations. 

This approach is intended to strike a 

balance between two competing goals. 

On the one hand, it is designed to 

facilitate the operation of effective 

internal compliance programs by not 

creating incentives for company 

personnel to seek a personal financial 

benefit by ‘‘front running’’ internal 

investigations and similar processes that 

are important components of effective 

company compliance programs. On the 

other hand, it would permit such 

persons to act as whistleblowers in 

circumstances where the company 

knows about material misconduct but 

has not taken appropriate steps to 

respond. Accordingly, in determining 

whether these persons would be 

considered to have provided 

‘‘independent knowledge’’ and would be 

eligible for whistleblower awards, the 

proposed rule focuses on whether the 

entity proceeded in bad faith or did not 

disclose the information to the 

Commission within a reasonable time.36

In determining whether an entity 

acted in bad faith, the Commission will, 

among other things, consider whether 

the entity or any personnel who were 

responsible for responding to allegations 

of misconduct took affirmative steps to 

hinder the preservation of evidence or a 

timely and appropriate investigation. 

For example, an effort by company 

officials to destroy documents or to 

interfere with witnesses would 

constitute bad faith conduct. Similarly, 

if a company engaged in a sham 

investigation of allegations, then the 

company’s response would constitute 

bad faith. 

The determination of what is a 

‘‘reasonable time’’ in this context will 

necessarily be a flexible concept that 

will depend on all of the facts and 

circumstances of the particular case. In 

some cases—for example, an ongoing 

fraud that poses substantial risk of harm 

to investors—a ‘‘reasonable time’’ for 

disclosing violations to the Commission 

may be almost immediate. Nonetheless, 

given the competing concerns just 

described, the Commission 

preliminarily believes that the proposed 

rule should not define one fixed period 

that would represent a ‘‘reasonable time’’ 

in all cases. We anticipate that in 

evaluating any whistleblower 

submissions by personnel covered by 

these exclusions, we will review all of 

the circumstances of the case after the 

fact in order to determine whether the 

company disclosed the misconduct to 

the Commission within a reasonable 

time or proceeded in bad faith. 

Further, if we determine that the 

whistleblower played a role in causing 

the company not to disclose the 

violations, or to delay in disclosing 

them, we will take this fact into 

consideration in our determination of 

whether to consider the whistleblower 

eligible for an award. A whistleblower 

will not be permitted to claim that the 

company did not disclose information 

to the Commission in a reasonable time 

if the whistleblower bears some 

responsibility for that failure. 

The following chart illustrates the 

fourth and fifth exclusions from 

‘‘independent knowledge:’’ 

Source of employee’s knowledge Does it qualify as ‘‘independent knowledge’’? 

Employee receives information because he/she is reasonably expected 

to take appropriate steps to respond to the violation because of his/ 

her legal, compliance, audit or supervisory responsibilities.

Employee will not be deemed to have independent knowledge of the 

information unless (1) the entity did not disclose the violation to the 

Commission within a reasonable period of time, or (2) acts in bad 

faith. 

Employee learns of information through company’s legal, compliance, 

audit or similar functions or processes for identifying or addressing 

potential non-compliance with laws.

Same as above. 

Employee otherwise lawfully learns of information through his/her workrelated functions.Employee will generally be deemed to have independent knowledge of 

the information [NOTE: if employee elects to report internally first, he/ 

she will receive the benefit of a ‘‘90-day look-back’’ for subsequent 

submission of information to SEC (See Proposed Rule 21F–4(b)(7))]. 

The sixth exclusion from 

‘‘independent knowledge’’ is for 

information that was obtained by a 

means or in a manner that violates 

applicable Federal or state criminal law. 

The policy rationale for this proposed 

exclusion is that a whistleblower should 

not be rewarded for violating a Federal 

or State criminal law. While Congress 

clearly intended through Section 21F to 

provide greater incentives for 

whistleblowers to come forward with 

information about wrongdoing, we think 

it is questionable that Congress intended 

to encourage whistleblower assistance 

to a law enforcement authority where 

the assistance itself is undertaken in 

violation of Federal or State criminal 

law. 

Finally. in order to prevent evasion of 

the rules, the seventh proposed 

exclusion would apply to anyone who 

obtained their information from persons 

subject to the first six exclusions. 

Request for Comment: 

7. Is it appropriate to include 

knowledge that is not direct, first-hand 

knowledge, but is instead learned from 

others, as ‘‘independent knowledge,’’ 

subject only to an exclusion for 

knowledge learned from publiclyavailable sources? 


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37 31 U.S.C. 3730(e)(4)(B), Pub. L. 111–148 sec. 

10104(h)(2), 124 Stat. 901 (Mar. 23. 2010). 

38See Proposed Rule 21F–9. 

8. Is there a different or more specific 

definition of ‘‘analysis’’ that would 

better effectuate the purposes of Section 

21F? 

9. Is it appropriate to exclude from the 

definition of ‘‘independent knowledge’’ 

or ‘‘independent analysis’’ information 

that is obtained through a 

communication that is protected by the 

attorney-client privilege? Are there 

other ways these rules should address 

privileged communications? For 

example, should other specific 

privileges be identified (spousal 

privilege, physician-patient privilege, 

clergy-congregant privilege, or others)? 

Should the exclusion apply broadly to 

information that is obtained through 

communications that are subject to any 

common law evidentiary privileges 

recognized under the laws of any state? 

10. Is it appropriate to exclude from 

the definition of independent 

knowledge’’ or ‘‘independent analysis’’ 

information that is obtained through the 

performance of an engagement required 

under the securities laws by an 

independent public accountant, if that 

information relates to a violation by the 

engagement client or the client’s 

directors, officers or other employees? 

Are there other ways that our rules 

should address the roles of accountants 

and auditors? 

11. Should the exclusion for 

‘‘independent knowledge’’ or 

‘‘independent analysis’’ go beyond 

attorneys and auditors, and include 

other professionals who may obtain 

information about potential securities 

violations in the course of their work for 

clients? If so, are there appropriate ways 

to limit the nature or extent of the 

exclusion so that any recognition of 

relationships of professional trust does 

not undermine the purposes of Section 

21F? 

12. Apart from persons who obtain 

information through privileged 

communications, and professionals who 

have access to client information, are 

there still other categories of persons 

who should not be considered for 

whistleblower awards based upon their 

professional duties or the manner in 

which they may acquire information 

about potential securities violations? If 

such exclusions are appropriate, what 

limits, if any, should be placed on them 

in order not to undermine the purposes 

of Section 21F? Is the exclusion for 

knowledge obtained through violations 

of criminal law appropriate? 

13. Do the proposed exclusions for 

information obtained by a person with 

legal, compliance, audit, supervisory, or 

governance responsibilities for an entity 

under an expectation that the person 

would cause the entity to take steps to 

respond to the violation, and for 

information otherwise obtained from or 

through an entity’s legal, compliance, 

audit, or similar functions strike the 

proper balance? Will the carve-out for 

situations where the entity does not 

disclose the information within a 

reasonable time promote effective selfpolicing functions and compliance with 

the law without undermining the 

operation of Section 21F? Should a 

‘‘reasonable time’’ be defined in the rule 

and, if so, what period should be 

specified (e.g., three months, six 

months, one year)? Does this provide 

sufficient incentives for people to 

continue to utilize internal compliance 

processes? Are there alternative or 

additional provisions the Commission 

should consider that would promote 

effective self-policing and self-reporting 

while still being consistent with the 

goals and text of Section 21F? 

14. Is the proposed exclusion for 

information obtained by a violation of 

Federal or State criminal law 

appropriate? Should the exclusion 

extend to violations of the criminal laws 

of foreign countries? What would be the 

policy reasons for either extending the 

exclusion to violations of foreign 

criminal law or not? Are there any other 

types of criminal violations that should 

be included? If so, on what basis? 

15. How should our rules treat 

information that may be provided to us 

in violation of judicial or administrative 

orders such as protective orders in 

private litigation? Should we exclude 

from whistleblower awards persons who 

provide information in violation of such 

orders? What would be the policy 

reason for this proposed exclusion? 

Under the statutory definition of 

‘‘original information,’’ a whistleblower 

who provides information that the 

Commission already knows from 

another source has not provided original 

information, unless the whistleblower is 

the ‘‘original source’’ of that information. 

Paragraphs (5) and (6) of Proposed Rule 

21F–4(b) describe how the Commission 

proposes to interpret and apply the term 

‘‘original source’’ as used in the 

definition of ‘‘original information.’’ 

Under the proposed rule, a 

whistleblower is an ‘‘original source’’ of 

the same information that the 

Commission obtains from another 

source if the other source obtained the 

information from the whistleblower or 

his representative. The whistleblower 

bears the burden of establishing that he 

is the original source of information. 

In Commission investigations, one 

way that this situation may arise is if the 

staff receives a referral from another 

authority such as the Department of 

Justice, a self-regulatory organization, or 

another organization that is identified in 

the proposed rule. In these 

circumstances, the proposed rule would 

credit the whistleblower with being the 

‘‘original source’’ of information on 

which the referral was based as long as 

the whistleblower ‘‘voluntarily’’ 

provided the information to the other 

authority within the meaning of these 

rules; i.e., the whistleblower or his 

representative must have come forward 

and given the other authority the 

information before receiving any 

request, inquiry, or demand to which 

the information was relevant. If a 

whistleblower claims to be the original 

source of information provided to the 

Commission by one of these authorities 

or another entity such as the 

whistleblower’s employer, the 

Commission may seek assistance and 

confirmation from the other authority or 

entity in determining whether the 

whistleblower is the original source of 

the information. 

Paragraph (6) of Proposed Rule 21F– 

4(b) addresses circumstances where the 

Commission already possesses some 

information about a matter at the time 

that a whistleblower provides additional 

information about the same matter. The 

whistleblower will be considered the 

‘‘original source’’ of any information that 

is derived from his independent 

knowledge or independent analysis and 

that materially adds to the information 

that the Commission already possesses. 

The standard is modeled after the 

definition of ‘‘original source’’ that 

Congress included in the False Claims 

Act through amendments earlier this 

year.37

As is described elsewhere in these 

proposed rules, a whistleblower will 

need to submit his information as well 

as a Form WB–DEC in order to start the 

process and establish the 

whistleblower’s eligibility for award 

consideration.38 A whistleblower who 

provides information to another 

authority first will need to follow these 

same procedures and submit the 

necessary forms to the Commission in 

order to perfect his status as a 

whistleblower under the Commission’s 

whistleblower program. However, under 

paragraph (7) of Proposed Rule 21F– 

4(b), as long as the whistleblower 

submits the necessary forms to the 

Commission within 90 days after he 

provided the same information to the 

other authority, the Commission will 

consider the whistleblower’s 

submission to be effective as of that 

earlier date. As noted above, the 


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39Exchange Act Release No. 44969 (October 23, 

2001). 

40See Rule 21F–6. In addition, as discussed 

below, in order to encourage whistleblowers to 

utilize internal reporting processes, we expect to 

give credit in the calculation of award amounts to 

whistleblowers who utilize established internal 

procedures for the receipt and consideration of 

complaints about misconduct. 

whistleblower must establish that he is 

the original source of the information 

provided to the other authority as well 

as the date of his submission, but the 

Commission may seek confirmation 

from the other authority in making this 

determination. The objective of this 

procedure is to provide further 

incentive for persons with knowledge of 

securities violations to come forward 

(consistent with the purposes of Section 

21F) by assuring potential 

whistleblowers that they can provide 

information to appropriate Government 

or regulatory authorities, and their 

‘‘place in line’’ will be protected in the 

event that other whistleblowers later 

provide the same information directly to 

the Commission. 

For similar reasons, proposed rule 

21F–4(b)(7) extends the same protection 

to whistleblowers who provide 

information about potential violations to 

the persons specified in Rules 21F– 

4(b)(4)(iv) and (v) (i.e., personnel 

involved in compliance or similar 

functions, or who are informed about 

potential violations with the expectation 

that they will take steps to address 

them), and who, within 90 days, submit 

the necessary whistleblower forms to 

the Commission. Compliance with the 

Federal securities laws is promoted 

when companies have effective 

programs for identifying, correcting, and 

self-reporting unlawful conduct by 

company officers or employees. The 

objective of this provision is to support, 

not undermine, the effective functioning 

of company compliance and related 

systems by allowing employees to take 

their concerns about potential violations 

to appropriate company officials first 

while still preserving their rights under 

the Commission’s whistleblower 

program. This objective is also 

important because internal compliance 

and reporting systems are essential 

sources of information for companies 

about misconduct that may not be 

securities-related (e.g., employment 

discrimination or harassment 

complaints), as well as for securitiesrelated complaints. The Commission 

does not intend for its rules to 

undermine effective company processes 

for receiving reports on potential 

violations that may be outside of the 

Commission’s enforcement interest, but 

are nonetheless important for 

companies to address. 

Given the policy interest in fostering 

robust corporate compliance programs, 

we considered the possible approach of 

requiring potential whistleblowers to 

utilize in-house complaint and reporting 

procedures, thereby giving employers an 

opportunity to address misconduct, 

before they make a whistleblower 

submission to the Commission. Among 

our concerns was the fact that, while 

many employers have compliance 

processes that are well-documented, 

thorough, and robust, and offer 

whistleblowers appropriate assurances 

of confidentiality, others lack such 

established procedures and protections. 

We emphasize, however, that our 

proposal not to require a whistleblower 

to utilize internal compliance processes 

does not mean that our receipt of a 

whistleblower complaint will lead to 

internal processes being bypassed. We 

expect that in appropriate cases, 

consistent with the public interest and 

our obligation to preserve the 

confidentiality of a whistleblower, our 

staff will, upon receiving a 

whistleblower complaint, contact a 

company, describe the nature of the 

allegations, and give the company an 

opportunity to investigate the matter 

and report back. The company’s actions 

in these circumstances will be 

considered in accordance with the 

Commission’s Report of Investigation 

Pursuant to Section 21(a) of the 

Securities Exchange Act of 1934 and 

Commission Statement on the 

Relationship of Cooperation to Agency 

Enforcement Decisions.39 This has been 

the approach of the Enforcement staff in 

the past, and the Commission expects 

that it will continue in the future. Thus, 

in this respect, we do not expect our 

receipt of whistleblower complaints to 

minimize the importance of effective 

company processes for addressing 

allegations of wrongful conduct.40

The Commission’s primary goal, 

consistent with the congressional intent 

behind Section 21F, is to encourage the 

submission of high-quality information 

to facilitate the effectiveness and 

efficiency of the Commission’s 

enforcement program. At the same time, 

we also want to implement Section 21F 

in a way that encourages strong 

company compliance programs. 

Therefore, we request comment on all 

aspects of the intersection between 

Section 21F and established internal 

systems for the receipt, handling, and 

response to complaints about potential 

violations of law. We particularly seek 

recommendations on structures, 

processes, and incentives that we 

should consider implementing in order 

to strike the right balance between the 

Commission’s need for a strong and 

effective whistleblower awards program, 

and the importance of preserving robust 

corporate structures for self-policing 

and self-reporting. 

Request for Comment. The 

Commission requests comment on all 

aspects of the definition of ‘‘original 

source’’ set forth in Proposed Rule 

21F–4(b)(4) and (5). 

16. Is the provision that would credit 

individuals with providing original 

information to the Commission as of the 

date of their submission to another 

Governmental or regulatory authority, or 

to company legal, compliance, or audit 

personnel, appropriate? In particular, 

does the provision regarding the 

providing of information to a company’s 

legal, compliance, or audit personnel 

appropriately accommodate the internal 

compliance process? 

17. Is the 90-day deadline for 

submitting Forms TCR and WB–DEC to 

the Commission (after initially 

providing information about violations 

or potential violations to another 

authority or the employer’s legal, 

compliance, or audit personnel) the 

appropriate timeframe? Should a longer 

time period apply in instances where a 

whistleblower believes that the 

company has or will proceed in bad 

faith? Would a 90-day deadline for 

submitting the TCR and WB–DEC also 

be appropriate in circumstances where 

an individual provides information to 

an SEC staff member? Would a shorter 

time frame be appropriate? Should there 

be different time frames for disclosures 

to other authorities and disclosures to 

an employer’s legal, compliance or audit 

personnel? 

18. Should the Commission consider 

other ways to promote continued robust 

corporate compliance processes 

consistent with the requirements of 

Section 21F? If so, what alternative 

requirements should be adopted? 

Should the Commission consider a rule 

that, in some fashion, would require 

whistleblowers to utilize employersponsored complaint and reporting 

procedures? What would be the 

appropriate contours of such a rule, and 

how could it be implemented without 

undermining the purposes of Section 

21F? Are there other incentives or 

processes the Commission could adopt 

that would promote the purposes of 

Section 21F while still preserving a 

critical role for corporate self-policing 

and self-reporting? 

19. Would the proposed rules 

frustrate internal compliance structures 

and systems that many companies have 

established in response to Section 

10A(m) of the Exchange Act, as added 

by Section 301 of the Sarbanes-Oxley 


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41The proposed rule includes examinations 

within its scope in recognition of the fact that, in 

some cases involving regulated entities, tips about 

potentially unlawful conduct are directed in the 

first instance to staff of the Commission’s Office of 

Compliance Inspections and Examinations, and 

after some additional consideration by examination 

staff may then lead to an investigation. 

42The proposed rule also makes clear that 

paragraph (2) of Proposed Rule 21F–4(c) does not 

apply when a whistleblower provides information 

to the Commission about a matter that is already 

under investigation by another authority if the 

whistleblower is the ‘‘original source’’ for that 

investigation under Proposed Rule 21F–4(b)(4). In 

those circumstances, paragraph (1) of Proposed 

Rule 21F–4(c) would govern the Commission’s 

analysis. 

43See Lacy v. United States, 221 Ct. Cl. 526 

(1979); cf. United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97 (3d Cir 2000). 

Act of 2002, and related exchange 

listing standards? If so, consistent with 

Section 21F, how can the potential 

negative impact on compliance 

programs be minimized? 

Proposed Rule 21F–4(c)—Information 

that Leads to Successful Enforcement. 

Under Section 21F, a whistleblower’s 

eligibility for an award depends in part 

on whether the whistleblower’s original 

information ‘‘led to the successful 

enforcement’’ of the Commission’s 

action or a related action. Proposed Rule 

21F–4(c) defines when original 

information ‘‘led to successful 

enforcement.’’ 

The Commission’s enforcement 

practice generally proceeds in several 

stages. First, the staff opens an 

investigation based upon some 

indication of potential violations of the 

Federal securities laws. Second, the staff 

conducts its investigation to gather 

additional facts in order to determine 

whether there is sufficient basis to 

recommend enforcement action. If so, 

the staff may recommend, and the 

Commission may authorize, the filing of 

an action. The definition in Proposed 

Rule 21F–4(c) would consider the 

significance of the whistleblower’s 

information to both the decision to open 

an investigation and the success of any 

resulting enforcement action. The 

proposed rule would distinguish 

between situations where the 

whistleblower’s information causes the 

staff to begin an investigation, and 

situations where the whistleblower 

provides information about conduct that 

is already under investigation. In the 

latter case, awards would be limited to 

the rare circumstances where the 

whistleblower provided essential 

information that the staff would not 

have otherwise obtained in the normal 

course of the investigation. Paragraphs 

(1) and (2) of Proposed Rule 21F–4(c) 

reflect these considerations. 

Paragraph (1) of Proposed Rule 

21F–4(c) applies to situations where the 

staff is not already reviewing the 

conduct in question, and establishes a 

two-part test for determining whether 

original information voluntarily 

provided by a whistleblower led to 

successful enforcement of a Commission 

action. First, the information must have 

caused the staff to commence an 

examination, open an investigation, 

reopen an investigation that had been 

closed, or to inquire concerning new 

and different conduct as part of an open 

examination or investigation.41 This 

does not necessarily contemplate that 

the whistleblower’s information will be 

the only information that the staff 

obtains before deciding to proceed. 

However, the proposed rule would 

apply when the whistleblower gave the 

staff information about conduct that the 

staff is not already investigating or 

examining, and that information was a 

principal motivating factor behind the 

staff’s decision to begin looking into the 

whistleblower’s allegations. 

Second, if the whistleblower’s 

information caused the Commission 

staff to start looking at the conduct for 

the first time, the proposed rule would 

require that the information 

‘‘significantly contributed’’ to the 

success of an enforcement action filed 

by the Commission. The proposed rule 

includes this requirement because the 

Commission believes that it is not the 

intent of Section 21F to authorize 

whistleblower awards for any and all 

tips about conduct that led to the 

opening of an investigation if the 

resulting investigation concludes in a 

successful enforcement action. Rather, 

implicit in the requirement that a 

whistleblower’s information ‘‘led to 

* * * successful enforcement’’ is the 

further expectation that the information, 

because of its high quality, reliability, 

and specificity, had a meaningful 

connection to the Commission’s ability 

to successfully complete its 

investigation and to either obtain a 

settlement or prevail in a litigated 

proceeding. 

Ultimately, successful enforcement of 

a judicial or administrative action 

depends on the staff’s ability to 

establish unlawful conduct by a 

preponderance of evidence. Thus, in 

order to ‘‘lead to successful 

enforcement,’’ the ‘‘original information’’ 

provided by a whistleblower should be 

connected to evidence that plays a 

significant role in successfully 

establishing the Commission’s claim. 

For example, the ‘‘led to’’ standard of 

Proposed Rule 21F–4(c)(1) would be 

met if a whistleblower were to provide 

the Commission staff with strong, direct 

evidence of violations that supported 

one or more claims in a successful 

enforcement action. To give another 

example, a whistleblower whose 

information did not provide this degree 

of evidence in itself, but who played a 

critical role in advancing the 

investigation by leading the staff 

directly to evidence that provided 

important support for one or more of the 

Commission’s claims could also receive 

an award, in particular if the evidence 

the whistleblower pointed to might have 

otherwise been difficult to obtain. A 

whistleblower who only provided vague 

information, or an unsupported tip, or 

evidence that was tangential and did not 

significantly help the Commission 

successfully establish its claims, would 

not meet the standard of this proposed 

rule. 

If information that a whistleblower 

provides to the Commission consists of 

‘‘independent analysis’’ rather than 

‘‘independent knowledge,’’ the 

evaluation of whether this analysis ‘‘led 

to successful enforcement’’ similarly 

would turn on whether it significantly 

contributed to the success of the action. 

This would involve, for example, 

considering the degree to which the 

analysis, by itself and without further 

investigation, indicated a high 

likelihood of unlawful conduct that was 

the basis, or was substantially the basis, 

for one or more claims in the 

Commission’s enforcement action. The 

purpose of this provision is to ensure 

that the analysis provided to the 

Commission results in the efficiency 

and effectiveness benefits to the 

enforcement program that were 

intended by Congress. 

Paragraph (2) of Proposed Rule 21F– 

4(c) sets forth a separate, higher 

standard for cases in which a 

whistleblower provides original 

information to the Commission about 

conduct that is already under 

examination or investigation by the 

Commission, Congress, any other 

Federal, state, or local authority, any 

self-regulatory organization, or the 

Public Company Accounting Oversight 

Board. In this situation, the information 

will be considered to have led to the 

successful enforcement of a judicial or 

administrative action if the information 

would not have otherwise been obtained 

and was essential to the success of the 

action.42 Although the Commission 

believes that awards under Section 21F 

generally should be limited to cases 

where whistleblowers provide original 

information about violations that are not 

already under investigation,43 there may 


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44As discussed below, however, if the 

Commission prevails on a claim that is based upon 

the information the whistleblower provided, and if 

all the conditions for an award are otherwise 

satisfied, the award to the whistleblower would be 

based upon all of the monetary sanctions obtained 

as a result of the action. See Proposed Rule 21F– 

4(d). 

45See Proposed Rule 21F–5. 

46E.g., SEC v. McCarthy, 322 F.3d 650, 656 (9th 

Cir. 2003) (‘‘An ‘action’ is defined as ‘a civil or 

criminal judicial proceeding.’ ’’). 

47 15 U.S.C. 78u–6(a)(1). 

48 15 U.S.C. 78u–6(b). 

49This approach offers enhanced potential 

incentives for whistleblowers when compared to 

other similar programs because those programs 

have typically limited awards to successful claims 

that the whistleblower actually identified. See 

Rockwell International Corp. v. United States, 549 

U.S. 457 (2007) (False Claims Act); John Doe v. 

United States, 65 Fed. Cl. 184 (2005) (Customs 

moiety statute, 19 U.S.C. 1619); Internal Revenue 

Manual 25.2.2.2.8.A (under IRS whistleblower 

program, collected proceeds only include proceeds 

from the single issue identified by the 

whistleblower, or substantially similar improper 

activity). 

be rare circumstances where 

information received from a 

whistleblower in relation to an ongoing 

investigation is so significant to the 

success of a Commission action that a 

whistleblower award should be 

considered. For example, a 

whistleblower who has not been 

questioned by the staff in an 

investigation, but who nonetheless has 

access to, and comes forward with a 

document that had been concealed from 

the staff, and that establishes proof of 

wrongdoing that is critical to the 

Commission’s ability to sustain its 

burden of proof, provides the type of 

assistance that should be considered for 

an award without regard to whether the 

staff was already investigating the 

conduct at the time the document was 

provided. We anticipate applying 

Proposed Rule 21F–4(c)(2) in a strict 

fashion, however, such that awards 

under this standard would be rare. 

In considering the relationship 

between information obtained from a 

whistleblower and the success of an 

enforcement action, the Commission 

will apply the same standards in both 

settled and litigated actions. 

Specifically, in a litigated action the 

whistleblower’s information must 

significantly contribute, or, in the case 

of conduct that is already under 

investigation, be essential, to the 

success of a claim on which the 

Commission prevails in litigation. For 

example, if a court finds in favor of the 

Commission on a number of claims in 

an enforcement action, but rejects the 

claims that are based upon the 

information the whistleblower 

provided, the whistleblower would not 

be considered eligible to receive an 

award.44 Similarly, in a settled action 

the Commission would consider 

whether the whistleblower’s 

information significantly contributed, or 

was essential, to allegations included in 

the Commission’s Federal court 

complaint, or to factual findings in the 

Commission’s administrative order. 

Request for Comment: 

20. Is the proposed standard for when 

original information voluntarily 

provided by a whistleblower ‘‘led to’’ 

successful enforcement action 

appropriate? 

21. In cases where the original 

information provided by the 

whistleblower caused the staff to begin 

looking at conduct for the first time, 

should the standard also require that the 

whistleblower’s information 

‘‘significantly contributed’’ to a 

successful enforcement action? 

a. If not, what standards should be 

used in the evaluation? 

b. If yes, should the proposed rule 

define with greater specificity when 

information ‘‘significantly contributed’’ 

to enforcement action? In what way 

should the phrase be defined? 

22. Is the proposal in Paragraph (c)(2), 

which would consider that a 

whistleblower’s information ‘‘led to’’ 

successful enforcement even in cases 

where the whistleblower gave the 

Commission original information about 

conduct that was already under 

investigation, appropriate? Should the 

Commission’s evaluation turn on 

whether the whistleblower’s 

information would not otherwise have 

been obtained and was essential to the 

success of the action? If not, what other 

standard(s) should apply? 

Proposed Rule 21F–4(d)—Action 

Proposed Rule 21F–4(d) defines the 

term ‘‘action.’’ For purposes of 

calculating whether monetary sanctions 

in a Commission action exceed the 

$1,000,000 threshold required for an 

award payment pursuant to Section 21F 

of the Exchange Act, as well as 

determining the monetary sanctions on 

which awards are based,45 the 

Commission proposes to interpret the 

term ‘‘action’’ to mean a single captioned 

civil or administrative proceeding. This 

approach to determining the scope of an 

‘‘action’’ is consistent with the most 

common meaning of the term,46 and is 

driven by the plain text of Section 21F. 

Section 21F(a)(1) defines a ‘‘covered 

judicial or administrative action’’ as 

‘‘any judicial or administrative action 

brought by the Commission under the 

securities laws that results in monetary 

sanctions exceeding $1,000,000.’’ 47

When the conditions for an award are 

satisfied in connection with a ‘‘covered 

judicial or administrative action,’’ the 

Commission must pay an award or 

awards in an aggregate amount equal to 

not less than 10 percent and not more 

than 30 percent ‘‘in total, of what has 

been collected of the monetary 

sanctions imposed in the action 

* * *.’’ 48

Two implications follow from this 

interpretation. First, the ‘‘action’’ would 

include all defendants or respondents, 

and all claims, that are brought within 

that proceeding without regard to which 

specific defendants or respondents, or 

which specific claims, were included in 

the action as a result of the information 

that the whistleblower provided. For 

example, if a whistleblower provided 

information concerning insider trading 

by a single individual, and, after an 

investigation, the Commission brought 

an action against that individual and 

others in a single captioned proceeding 

in Federal court, then the sanctions 

collected from all the defendants in the 

action would be added up to determine 

whether the $1,000,000 threshold has 

been met. Similarly, if a corporate 

accounting employee provided the 

Commission with information about a 

fraudulent accounting practice, and, 

after investigation, the Commission 

brought an action that also included 

unrelated claims discovered during the 

investigation, the $1,000,000 threshold 

amount for an award would be 

determined based upon the total 

monetary sanctions obtained in the 

action. This approach would effectuate 

the purposes of Section 21F by 

enhancing the incentives for individuals 

to come forward and report potential 

securities law violations to the 

Commission,49 and would avoid the 

challenges associated with attempting to 

allocate monetary sanctions involving 

multiple individuals and claims based 

upon the select individuals and claims 

reported by whistleblowers. 

Second, this proposed approach to 

interpreting the term ‘‘action’’ also 

would mean that the Commission 

would not aggregate sanctions that are 

imposed in separate judicial or 

administrative actions for purposes of 

determining whether the $1,000,000 

threshold is satisfied, even if the actions 

arise out of a single investigation. For 

example, if a whistleblower’s 

submission leads to two separate 

enforcement actions, each with total 

sanctions of $600,000, then no 

whistleblower award would be 

authorized because no single action will 

have obtained sanctions exceeding 

$1,000,000. 

Request for Comment: 


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50 15 U.S.C. 78u–6(a)(4). 

51 15 U.S.C. 78c(a)(34). 

52Title III of Dodd-Frank abolishes the Office of 

Thrift Supervision and transfers its functions to 

other agencies one year after the date of enactment, 

unless the transfer date is extended. 

53Section 21F alternately uses the terms 

‘‘appropriate regulatory agency’’ and ‘‘appropriate 

regulatory authority.’’ Compare Section 

21F(c)(2)(A)(i) (15 U.S.C. 78u–6(c)(2)(A)(i)) with 

Section 21F(h)(2)(D)(i)((II) (15 U.S.C. 78u– 

6(h)(2)(D)(i)((II)). Because we do not believe that 

Congress intended this differing terminology to 

reflect substantive distinctions, the proposed rules 

use the term ‘‘appropriate regulatory agency’’ in all 

instances. 

54See Section 21F(c)(2)(A), 15 U.S.C. 78u– 

6(c)(2)(A). 

55 15 U.S.C. 78c(a)(26). 

56 15 U.S.C. 78s(b) and (c). 

23. The Commission requests 

comment on the proposed definition of 

the word ‘‘action.’’ Are there other ways 

to define an ‘‘action’’ that are consistent 

with the text of Section 21F and that 

will better effectuate the purposes of the 

statute? 

Proposed Rules 21F–4(e)—Monetary 

Sanctions. Proposed Rule 21F–4(e) 

defines ‘‘monetary sanctions’’ to mean 

any money, including penalties, 

disgorgement, and interest, ordered to 

be paid and any money deposited into 

a disgorgement fund or other fund 

pursuant to Section 308(b) of the 

Sarbanes-Oxley Act of 2002 as a result 

of a Commission action or a related 

action. This definition tracks the 

definition of the same term found in 

Section 21F of the Exchange Act.50 The 

Commission interprets the reference in 

the statute to ‘‘penalties, disgorgement, 

and interest’’ to be examples of 

monetary sanctions, and not exclusive. 

Thus, regardless of how designated, the 

Commission will consider all amounts 

that are ‘‘ordered to be paid’’ in an action 

as ‘‘monetary sanctions’’ for purposes of 

Section 21F. 

Proposed Rule 21F–4(f)—Appropriate 

Regulatory Agency. 

Section 3(a)(34) of the Exchange 

Act 51 designates the Commission, the 

Comptroller of the Currency, the Board 

of Governors of the Federal Reserve 

System, the Federal Deposit Insurance 

Corporation, and the Office of Thrift 

Supervision as ‘‘appropriate regulatory 

agencies’’ for specified entities and 

functions.52 For example, when a 

national bank is a municipal securities 

dealer, the Comptroller of the Currency 

is designated as the appropriate 

regulatory agency; when a state member 

bank of the Federal Reserve System is a 

municipal securities dealer, the Federal 

Reserve Board is designated as the 

appropriate regulatory agency. 

Proposed Rule 21F–4(f) would make 

clear that the Commission, the 

Comptroller of the Currency, the Board 

of Governors of the Federal Reserve 

System, the Federal Deposit Insurance 

Corporation, and the Office of Thrift 

Supervision (as well as any other 

agencies that may be added to Section 

3(a)(34) of the Exchange Act by future 

amendment) are deemed to be 

‘‘appropriate regulatory agencies’’ for all 

purposes under Section 21F of the 

Exchange Act.53 This means, in 

particular, that the Commission would 

consider a member, officer, or employee 

of one of the designated agencies to be 

ineligible to receive a whistleblower 

award under any circumstances, even if 

the information that the person 

possesses is unrelated to the agency’s 

regulatory function. This interpretation 

would place members, officers, and 

employees of appropriate regulatory 

agencies on equal footing with those of 

other organizations, such as the Public 

Company Accounting Oversight Board 

and law enforcement organizations, who 

are also statutorily ineligible to receive 

whistleblower awards.54

Request for Comment: 

24. Is the proposed definition of 

‘‘appropriate regulatory agency’’ 

appropriate? Are there other definitions 

that that should be adopted instead? 

Proposed Rule 21F–4(g)—SelfRegulatory Organization. Section 

3(a)(26) of the Exchange Act 55

designates national securities 

exchanges, registered securities 

associations, and registered clearing 

agencies as self-regulatory 

organizations, and the Municipal 

Securities Rulemaking Board as a selfregulatory organization solely for 

purposes of Sections 19(b) and (c) of the 

Exchange Act (relating to rulemaking).56

Consistent with the approach taken with 

regard to the definition of ‘‘appropriate 

regulatory agency’’ (see discussion 

above), Proposed Rule 21F–4(g) would 

make clear that the Municipal Securities 

Rulemaking Board is considered to be a 

‘‘self-regulatory organization’’ for all 

purposes under Section 21F. 

Request for Comment: 

25. Is the proposed definition of ‘‘selfregulatory organization’’ appropriate? 

Are there other definitions that that 

should be adopted instead? 

E. Proposed Rule 21F–5—Amount of 

Award 

Proposed Rule 21F–5 states that, if all 

conditions are met, the Commission will 

pay an award of at least 10 percent and 

no more than 30 percent of the total 

monetary sanctions collected in 

successful Commission and related 

actions. This range is specified in 

Section 21F(b)(1) of the Exchange Act. 

Where multiple whistleblowers are 

entitled to an award, paragraph (b) 

states that the Commission will 

independently determine the 

appropriate award percentage for each 

whistleblower, but total award 

payments, in the aggregate, will equal 

between 10 and 30 percent of the 

monetary sanctions collected in the 

Commission’s action and the related 

action. Thus, for example, one 

whistleblower could receive an award of 

25 percent of the collected sanctions, 

and another could receive an award of 

5 percent, but they could not each 

receive an award of 30 percent. Since 

the Commission anticipates that the 

timing of award determinations and the 

value of a whistleblower’s contribution 

could be different for the Commission’s 

action and for related actions, the 

proposed rule would provide that the 

percentage awarded in connection with 

a Commission action may differ from 

the percentage awarded in related 

actions. 

Request for Comment: 

24. Is the provision stating that the 

percentage amount of an award in a 

Commission action may differ from the 

percentage awarded in a related action 

appropriate? 

F. Proposed Rule 21F–6—Criteria for 

Determining Amount of Award 

Assuming that all of the conditions 

for making an award to a whistleblower 

have been satisfied, Proposed Rule 21F– 

6 sets forth the criteria that the 

Commission would take into 

consideration in determining the 

amount of the award. Paragraphs (a) 

through (c) of the proposed rule recite 

three criteria that Section 21F of the 

Exchange Act requires the Commission 

to consider, and paragraph (d) adds a 

fourth criterion. 

Paragraph (a) requires the 

Commission to consider the significance 

of the information provided by a 

whistleblower to the success of the 

Commission action or related action. 

Paragraph (b) requires the Commission 

to consider the degree of assistance 

provided by the whistleblower and any 

legal representative of the whistleblower 

in the Commission action or related 

action. Paragraph (c) requires the 

Commission to consider its 

programmatic interest in deterring 

violations of the securities laws by 

making awards to whistleblowers that 

provide information that leads to 

successful enforcement actions. 

Paragraph (d) would permit the 

Commission to consider whether an 

award otherwise enhances its ability to 

enforce the Federal securities laws, 

protect investors, and encourage the 


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57As described elsewhere in these rules, if the 

information provided by a whistleblower relates to 

only a portion of a successful enforcement action, 

the Commission proposes to look to the entirety of 

the action (including all defendants or respondents, 

all claims, and all monetary sanctions obtained) in 

determining whether the action is eligible for an 

award (because it meets the $1,000,000 threshold) 

and the total dollar amount of sanctions on which 

the whistleblower’s award will be based. However, 

under paragraph (a) of Proposed Rule 21F–6, the 

fact that the whistleblower’s information related to 

only a portion of the overall action would be a 

factor in determining the amount of the 

whistleblower’s award. Thus, if the whistleblower’s 

information supported only a small part of a larger 

case, that would be a reason for making an award 

based upon a smaller percentage amount than 

otherwise would have been awarded. 

58 15 U.S.C. 78u–6(h)(2). 59Under Section 21F(h)(2), whistlebloweridentifying information is also expressly exempted 

from the provisions of the Freedom of Information 

Act, 5 U.S.C. 552. 

60See U.S. Const. Amend. VI. 

submission of high quality information 

from whistleblowers. 

The Commission anticipates that the 

determination of awards amounts 

pursuant to paragraphs (a)–(d) will 

involve highly individualized review of 

the circumstances surrounding each 

award. To allow for this, the 

Commission preliminarily believes that 

the four criteria afford the Commission 

broad discretion to weigh a multitude of 

considerations in determining the 

amount of any particular award. 

Depending upon the facts and 

circumstances of each case, some of the 

considerations may not be applicable or 

may deserve greater weight than others. 

The permissible considerations 

include, but are not limited to, those set 

forth below. These considerations are 

not listed in order of importance nor are 

they intended to be all-inclusive or to 

require a specific determination in any 

particular case: 

• The character of the enforcement 

action, including whether its subject 

matter is a Commission priority, 

whether the reported misconduct 

involves regulated entities or 

fiduciaries, the type and severity of the 

securities violations, the age and 

duration of misconduct, the number of 

violations, and the isolated, repetitive, 

or ongoing nature of the violations; 

• The dangers to investors or others 

presented by the underlying violations 

involved in the enforcement action, 

including the amount of harm or 

potential harm caused by the underlying 

violations, the type of harm resulting 

from or threatened by the underlying 

violations, and the number of 

individuals or entities harmed; 

• The timeliness, degree, reliability, 

and effectiveness of the whistleblower’s 

assistance; 

• The time and resources conserved 

as a result of the whistleblower’s 

assistance; 

• Whether the whistleblower 

encouraged or authorized others to 

assist the staff who might otherwise not 

have participated in the investigation or 

related action; 

• Any unique hardships experienced 

by the whistleblower as a result of his 

or her reporting and assisting in the 

enforcement action; 

• The degree to which the 

whistleblower took steps to prevent the 

violations from occurring or continuing; 

• The efforts undertaken by the 

whistleblower to remediate the harm 

caused by the violations, including 

assisting the authorities in the recovery 

of the fruits and instrumentalities of the 

violations; 

• Whether the information provided 

by the whistleblower related to only a 

portion of the successful claims brought 

in the Commission or related action; 57

• The culpability of the 

whistleblower including whether the 

whistleblower acted with scienter, both 

generally and in relation to others who 

participated in the misconduct; and 

• Whether, and the extent to which, 

a whistleblower reported the potential 

violation through effective internal 

whistleblower, legal or compliance 

procedures before reporting the 

violation to the Commission. 

This last consideration is not a 

requirement for an award above the 10 

percent statutory minimum and 

whistleblowers will not be penalized if 

they do not avail themselves of this 

opportunity for fear of retaliation or 

other legitimate reasons. The 

Commission will consider higher 

percentage awards for whistleblowers 

who first report violations through their 

compliance programs. Corporate 

compliance programs play a role in 

preventing and detecting securities 

violations that could harm investors. If 

these programs are not utilized or 

working, our system of securities 

regulation will be less effective. 

Accordingly, the Commission believes 

that encouraging whistleblowers to 

report securities violations to their 

corporate compliance programs is 

consistent with the Commission’s 

investor protection mission. 

Request for Comment: 

27. Should the Commission identify, 

by rule, additional criteria that it will 

consider in determining the amount of 

an award? If so, what criteria should be 

included? Should we include as a 

criterion the consideration of whether, 

and the extent to which, a 

whistleblower reported the potential 

violation through effective internal 

whistleblower, legal or compliance 

procedures before reporting the 

violation to the Commission? Should we 

include any of the other considerations 

described above? 

28. Should we include the role and 

culpability of the whistleblower in the 

unlawful conduct as an express 

criterion that would result in reducing 

the amount of an award within the 

statutorily-required range? Should 

culpable whistleblowers be excluded 

from eligibility for awards? Would such 

an exclusion be consistent with the 

purposes of Section 21F? 

G. Proposed Rule 21F–7— 

Confidentiality of Submissions 

Proposed Rule 21F–7 reflects the 

confidentiality requirements set forth in 

Section 21F(h)(2) of the Exchange Act 58

with respect to information that could 

reasonably be expected to reveal the 

identity of a whistleblower. As a general 

matter, it is the Commission’s policy 

and practice to treat all information 

obtained during its investigations as 

confidential and nonpublic. Disclosures 

of enforcement-related information to 

any person outside the Commission may 

only be made as authorized by the 

Commission and in accordance with 

applicable laws and regulations. 

Consistent with Section 21F(h)(2), the 

proposed rule explains that the 

Commission will not reveal the identity 

of a whistleblower or disclose other 

information that could reasonably be 

expected to reveal the identity of a 

whistleblower, except under 

circumstances described in the statute 

and the rule.59 As is further explained 

below, there may be circumstances in 

which disclosure of information that 

identifies a whistleblower will be 

legally required or will be necessary for 

the protection of investors. 

Paragraph (a)(1) of the proposed rule 

would authorize disclosure of 

information that could reasonably be 

expected to reveal the identity of a 

whistleblower when disclosure is 

required to a defendant or respondent in 

a Federal court or administrative action 

that the Commission files or in another 

public action or proceeding filed by an 

authority to which the Commission may 

provide the information. For example, 

in a related action brought as a criminal 

prosecution by the Department of 

Justice, disclosure of a whistleblower’s 

identity may be required, in light of the 

requirement of the Sixth Amendment of 

the Constitution that a criminal 

defendant have the right to be 

confronted with witnesses against 

him.60 Paragraph (a)(2) would authorize 

disclosure to the Department of Justice, 

an appropriate regulatory agency, a self 

regulatory organization, a state attorney 


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61See Section 21F(d)(1), 15 U.S.C. 78u–6(d)(1). 

Under the statute, however, an anonymous 

whistleblower seeking an award is required to be 

represented by counsel. Section 21F(d)(2), 15 U.S.C. 

78u–6(d)(2). 

62 17 CFR 201.102(e). 

63 17 CFR 102(f). 

64United States v. Overseas Shipholding Group, 

Inc., 2010 WL 4104663 at *7 (1st Cir. 2010) 

(limitations on fees ‘‘are particularly appropriate in 

situations such as this where awarding an excessive 

fee to the attorney would itself undermine the 

objectives of the Federal statutory scheme. The 

whole purpose of the discretionary award to 

whistleblowers under this statute is to create 

incentives for the whistleblower to take risks that 

may disadvantage the whistleblower in his 

relationship to his employer. The amount of the fee 

that will be siphoned off by the lawyer significantly 

affects the size of that award and the power of the 

incentive. The court in administering this statute is 

obligated to ensure his excessive legal fees will not 

diminish the statutory incentive.’’). 

65See Section 21F(c)(2)(D), which prohibits the 

Commission from paying an award to any 

whistleblower ‘‘who fails to submit information to 

the Commission in such form as the Commission 

may, by rule, require. 15 U.S.C. 78u–6(c)(2)(D). 

66 15 U.S.C. 78u–6(c)(2). 

67Section 21F(e) of the Exchange Act authorizes 

the Commission to require that a whistleblower 

enter into a contract. 15 U.S.C. 78u–6(e). 

general in connection with a criminal 

investigation, any appropriate state 

regulatory authority, the Public 

Company Accounting Oversight Board, 

or foreign securities and law 

enforcement authorities when it is 

necessary to achieve the purposes of the 

Exchange Act and to protect investors. 

With the exception of foreign securities 

and law enforcement authorities, each 

of these entities is subject to the 

confidentiality requirements set forth in 

Section 21F(h) of the Exchange Act. 

Since foreign securities and law 

enforcement authorities are not bound 

by these confidentiality requirements, 

the proposed rule states that the 

Commission may determine what 

assurances of confidentiality are 

appropriate prior to disclosing such 

information. Paragraph (a)(3) would 

authorize disclosure in accordance with 

the Privacy Act of 1974. 

Because many whistleblowers may 

wish to provide information 

anonymously, paragraph (b) of the 

proposed rule states that anonymous 

submissions are permitted with certain 

specified conditions. Paragraph (b)(1) 

would require that anonymous 

whistleblowers be represented by an 

attorney and that the attorney’s contact 

information be provided to the 

Commission at the time of the 

whistleblower’s initial submission. The 

purpose of this requirement is to 

prevent fraudulent submissions and to 

facilitate communication and assistance 

between the whistleblower and the 

Commission’s staff. Any whistleblower 

may be represented by counsel— 

whether submitting information 

anonymously or not.61 Paragraph (b)(2) 

would require that anonymous 

whistleblowers and their counsel follow 

the required procedures outlined in 

Proposed Rule 21F–9. Paragraph (b)(3) 

would require that anonymous 

whistleblowers disclose their identity, 

pursuant to the procedures outlined in 

Proposed Rule 21F–10, before the 

Commission will pay any award. We 

emphasize that anonymous 

whistleblowers have the same rights and 

responsibilities as other whistleblowers 

under Section 21F of the Exchange Act 

and these proposed rules, unless 

expressly exempted. 

Pursuant to Rule 102(e) of the 

Commission’s Rules of Practice,62 the 

Commission may deny the privilege of 

practicing before the Commission to any 

person who, after notice and 

opportunity for hearing, is found not to 

possess the requisite qualifications to 

represent others, to be lacking in 

character or integrity, to have engaged 

in unethical or improper professional 

conduct, or to have willfully violated or 

willfully aided and abetted the violation 

of any provision of the Federal 

securities laws or rules. Practice before 

the Commission is defined to include 

transacting any business with the 

Commission.63 The Commission 

cautions attorneys that representation of 

whistleblowers will constitute practice 

before the Commission. Accordingly, 

misconduct by an attorney representing 

a whistleblower can result in the 

attorney being subject to disciplinary 

sanctions under any of the conditions 

set forth in Rule 102(e). 

Request for Comment: 

29. Because representation of 

whistleblowers constitutes practice 

before the Commission by an attorney, 

should the Commission consider 

adopting rules governing conduct by 

attorneys engaged in this type of 

practice? In some contexts, courts have 

disallowed excessive fee requests to 

attorneys for whistleblowers.64 Should 

we adopt a rule regarding fees in the 

representation of whistleblower clients? 

Would such a rule encourage or 

discourage whistleblower submissions? 

H. Proposed Rule 21F–8—Eligibility 

Paragraph (a) of Proposed Rule 21F– 

8 makes clear that providing 

information in the form and manner 

required by these rules is a fundamental 

criterion of eligibility for a 

whistleblower award.65 However, in 

order to prevent undue hardship, the 

Commission, in its sole discretion, may 

waive any of these procedural 

requirements based upon a showing of 

extraordinary circumstances. 

The specific procedures required for 

submitting original information and 

making a claim for a whistleblower 

award are described in Proposed Rules 

21F–9 through 21F–11. Proposed Rule 

21F–8(b) contains several additional 

procedural requirements, which are 

designed to assist the Commission in 

evaluating and using the information 

provided. These include that the 

whistleblower, upon request, agree to 

provide explanations and other 

assistance including, but not limited to, 

providing all additional information in 

the whistleblower’s possession that is 

related to the subject matter of his 

submission. In order to accommodate 

whistleblowers who elect to submit 

information anonymously, the staff will 

have discretion to make special 

arrangements to meet these procedural 

requirements. 

Paragraph (b) of the proposed rule 

also would require whistleblowers, if 

requested by the staff, to provide 

testimony or other acceptable evidence 

relating to whether they are eligible for 

or otherwise satisfy any of the 

conditions for an award. Because 

Section 21F(c)(2) of the Exchange Act 

statutorily excludes certain persons 

from receiving whistleblower awards,66

and Section 21F further conditions the 

grant of an award on factors that are 

unique to each individual 

whistleblower (e.g., that the individual 

act ‘‘voluntarily’’ and provide 

information that meets all the criteria of 

‘‘original information’’), this provision is 

designed to ensure that the staff has 

authority to confirm that whistleblowers 

meet all of the necessary eligibility 

criteria and conditions. It is anticipated 

that the staff may seek such confirming 

evidence at any point after a 

whistleblower files Form WB–DEC (as 

set forth in Proposed Rule 21F–9), 

including, without limitation, in 

connection with the claims review 

process described in Proposed Rules 

21F–10 and 21F–11. 

Finally, paragraph (b) of proposed 

rule 21F–8 would authorize the staff to 

require that a whistleblower enter into 

a confidentiality agreement in a form 

acceptable to the Whistleblower Office, 

including a provision that a violation 

may result in the whistleblower being 

ineligible for an award.67 In some cases, 

a confidentiality agreement may be 

required if it becomes necessary or 

advisable for the staff to share nonpublic information with a whistleblower 

either during the course of the 

investigation (for example, to obtain the 

whistleblower’s assistance in 

interpreting documents), or as part of 


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68As noted above, Section 10A of the Exchange 

Act requires that a registered public accounting firm 

engaged in an audit of financial statements of an 

issuer required under the Exchange Act take certain 

steps if the auditor detects or otherwise becomes 

aware of information indicating an illegal act, 

which in certain circumstances can include 

reporting directly to the Commission. The 

Commission interprets the exclusion in Section 

21F(c)(2)(C) to apply to persons who obtain 

information through the performance of an audit 

that is subject to the requirements of Section 10A, 

whether or not the audit results in the accounting 

firm making a report to the Commission. In addition 

to this statutory exclusion, the Commission is 

proposing, through the definition of ‘‘original 

information,’’ a broader exclusion for persons who 

obtain information through the performance of an 

engagement required under the securities laws by 

an independent public accountant. See Proposed 

Rule 21F–4(b)(4)(iii). 

69For example, Article 8(4) of the United Nations 

Convention Against Corruption requires that party 

states consider establishing measures and systems 

to facilitate the reporting by public officials of acts 

of corruption to appropriate authorities, when such 

acts come to their notice in the performance of their 

functions. 

70See Proposed Rule 21F–2. 

71The Commission anticipates that, by the time 

final rules are adopted to implement Section 21F, 

potential whistleblowers will be able to submit 

information to the Commission online through the 

Electronic Data Collection System, an interactive, 

web-based database for submission of tips, 

complaints and referrals. Whistleblowers who wish 

to submit their information in paper format would 

be required to use proposed Form TCR. Both 

methods of submission are designed to elicit 

substantially similar information concerning the 

individual submitting the information and the 

violation alleged. For purposes of these rules, the 

Commission is only discussing proposed Form 

TCR. The Commission will be separately submitting 

a request to the Office of Management and Budget 

for Paperwork Reduction Act approval of the 

Electronic Data Collection System. 

the claims process set forth in Proposed 

Rules 21F–10 and 21F–11. 

Paragraph (c) of Proposed Rule 21F– 

8 recites the categories of individuals 

who are ineligible for an award, many 

of which are set forth in Section 

21F(c)(2). These include persons who 

are, or were at the time they acquired 

the original information, a member, 

officer, or employee of the Department 

of Justice, an appropriate regulatory 

agency, a self-regulatory organization, 

the Public Company Accounting 

Oversight Board, or any law 

enforcement organization; anyone who 

is convicted of a criminal violation that 

is related to the Commission action or 

to a related action for which the person 

otherwise could receive an award; any 

person who obtained the information 

provided to the Commission through an 

audit of a company’s financial 

statements, and making a whistleblower 

submission would be contrary to the 

requirements of Section 10A of the 

Exchange Act, 15 U.S.C. 78j–1); 68 and 

any person who in his whistleblower 

submission, his other dealings with the 

Commission, or his dealings with 

another authority in connection with a 

related action, knowingly and willfully 

makes any false, fictitious, or fraudulent 

statement or representation, or uses any 

false writing or document, knowing that 

it contains any false, fictitious, or 

fraudulent statement or entry. Paragraph 

(c)(2) of Proposed Rule 21F–8 also 

would make foreign officials ineligible 

to receive a whistleblower award. The 

payment of awards to foreign officials 

could have negative repercussions for 

United States foreign relations, 

including creating a perception that the 

United States is interfering with foreign 

sovereignty, potentially undermining 

foreign government cooperation under 

existing treaties (including multilateral 

and bilateral mutual legal assistance 

treaties),69 encouraging corruption, and 

raising concerns about protection of 

foreign officials who become 

whistleblowers. In order to prevent 

evasion of these exclusions, paragraph 

(c)(5) of the proposed rule also provides 

that persons who acquire information 

from ineligible individuals are ineligible 

for an award. In addition, paragraph 

(c)(6) would make any person ineligible 

who is the spouse, parent, child, or 

sibling of a member or employee of the 

Commission, or who resides in the same 

household as a member or employee of 

the Commission, in order to prevent the 

appearance of improper conduct by 

Commission employees. 

Paragraph (d) of Proposed Rule 21F– 

8 reiterates that a determination that a 

whistleblower is ineligible to receive an 

award for any reason does not deprive 

the individual of the anti-retaliation 

protections set forth in Section 21F(h)(1) 

of the Exchange Act.70

Request for Comment. 

30. We request comment on the 

manner of submission requirements set 

forth in Proposed Rule 21F–8(b). Are 

these requirements appropriate? Should 

there be different or additional 

requirements to supplement the 

submission of information as set forth in 

Proposed Rule 21F–9? 

31. We also request comment on the 

ineligibility criteria set forth in 

Proposed Rule 21F–8(c). Are there other 

statuses or activities that should render 

an individual ineligible for a 

whistleblower award? 

I. Proposed Rule 21F–9—Procedures for 

Submitting Original Information 

The Commission proposes a two-step 

process for the submission of original 

information under the whistleblower 

award program. In general, the first step 

would require the submission of 

information either on a standard form or 

through the Commission’s online 

database for receiving tips, complaints 

and referrals. The second step would 

require the whistleblower to complete a 

Whistleblower Office form, signed 

under penalties of perjury, in which the 

whistleblower would be required to 

make certain representations concerning 

the veracity of the information provided 

and the whistleblower’s eligibility for a 

potential award. The use of 

standardized forms and the electronic 

database will greatly assist the 

Commission in managing and tracking 

the thousands of tips that it receives 

annually. This will also better enable 

the Commission to connect tips to each 

other so as to make better use of the 

information provided, and to connect 

tips to requests for payment under the 

whistleblower provisions. The purpose 

of requiring a sworn declaration is to 

help deter the submission of false and 

misleading tips and the resulting 

inefficient use of the Commission’s 

resources. The requirement should also 

mitigate the potential harm to 

companies and individuals that may be 

caused by false or spurious allegations 

of wrongdoing. 

1. Form TCR and Instructions 

Paragraph (a) of Proposed Rule 21F– 

9 requires the submission of information 

in one of two ways. A whistleblower 

may submit the information 

electronically through the Commission’s 

Electronic Data Collection System 

available on the Commission’s Web site 

or by completing and submitting 

proposed Form TCR—Tip, Complaint or 

Referral.71 Form TCR, and the 

instructions thereto, are designed to 

capture basic identifying information 

about a complainant and to elicit 

sufficient information to determine 

whether the conduct alleged suggests a 

violation of the Federal securities laws. 

Proposed items A1 through A3 of Form 

TCR would request the whistleblower’s 

name and contact information, 

including a physical address, email 

address and telephone number. 

Proposed item A4 would ask the 

whistleblower to indicate his 

occupation. In instances where a 

whistleblower submits information 

anonymously, the identifying 

information for the whistleblower 

would not be required, but proposed 

Items B1 through B4 of the form would 

require the name and contact 

information of the whistleblower’s 

attorney. This information may also be 

included in the case of whistleblowers 

whose identities are known and who are 

represented by counsel in the matter. 

Proposed Items C1 through C4 would 

request basic identifying information for 


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the individual(s) or entity(ies) to which 

the complaint relates. Proposed Items 

D1 through D9 are designed to elicit 

details concerning the alleged securities 

violation. Proposed Items D1 and D2 

would ask the whistleblower to provide 

the date of the occurrence and describe 

the nature of the complaint. Proposed 

Items D3 and D4 would ask whether the 

complaint relates to an entity of which 

the whistleblower is or was an officer, 

director, employee, consultant or 

contractor and, if so, whether the 

whistleblower has taken any prior 

action regarding the complaint, what 

actions were taken and the date on 

which the action(s) were taken. 

Proposed Item D5 would ask about the 

type of security or investment involved, 

the name of the issuer and the ticker 

symbol or CUSIP number, if applicable. 

Proposed Item D6 would ask the 

whistleblower to state in detail all facts 

pertinent to the alleged violation. 

Proposed Item D7 would ask for a 

description of all supporting materials 

in the whistleblower’s possession and 

the availability and location of any 

additional supporting materials not in 

the whistleblower’s possession. Item D8 

would ask for an explanation of how the 

whistleblower obtained the information 

that supports the claim. Proposed Item 

D9 would provide the whistleblower 

with an opportunity to provide any 

additional information the 

whistleblower thinks may be relevant to 

his submission. The questions posed on 

proposed Form TCR are designed to 

elicit the minimum information 

required for the Commission to make a 

preliminary assessment concerning the 

likelihood that the alleged conduct 

suggests a violation of the securities 

laws. Moreover, the proposed 

instructions to Form TCR are designed 

to assist the whistleblower and facilitate 

the completion of the form. 

2. Form WB–DEC and Instructions 

In addition to submitting information 

in the form and manner required by 

paragraph (a), the Commission proposes 

in paragraph (b) of Proposed Rule 21F– 

9 to require that whistleblowers who 

wish to be considered for an award in 

connection with the information they 

provide to the Commission also 

complete and provide the Commission 

with proposed Form WB–DEC, 

Declaration Concerning Original 

Information Provided Pursuant to § 21F 

of the Securities Exchange Act of 1934. 

Proposed Form WB–DEC would require 

a whistleblower to answer certain 

threshold questions concerning the 

whistleblower’s eligibility to receive an 

award. The form also would contain a 

statement from the whistleblower 

acknowledging that the information 

contained in the Form WB–DEC, as well 

as all information contained in the 

whistleblower’s submission, is true, 

correct and complete to the best of the 

whistleblower’s knowledge, information 

and belief. Moreover, the statement 

would acknowledge the whistleblower’s 

understanding that the whistleblower 

may be subject to prosecution and 

ineligible for an award if, in the 

whistleblower’s submission of 

information, other dealings with the 

Commission, or dealings with another 

authority in connection with a related 

action, the whistleblower knowingly 

and willfully makes any false, fictitious, 

or fraudulent statements or 

representations, or uses any false 

writing or document knowing that the 

writing or document contains any false, 

fictitious, or fraudulent statement or 

entry. 

In instances where information is 

provided by an anonymous 

whistleblower, proposed paragraph (c) 

of Proposed Rule 21F–9 would require 

the attorney representing the 

whistleblower to provide the 

Commission with a separate Form WB– 

DEC certifying that the attorney has 

verified the identity of the 

whistleblower, and will retain the 

whistleblower’s original, signed Form 

WB–DEC in the attorney’s files. The 

proposed certification from counsel is 

an important element of the 

whistleblower program to help ensure 

that the Commission is working with 

whistleblowers whose identities have 

been verified by their counsel. The 

proposed certification process also 

would provide a mechanism for 

anonymous whistleblowers to be 

advised by their counsel regarding their 

preliminary eligibility for an award. 

Proposed Items A1 through A3 of 

Form WB–DEC would request the 

whistleblower’s name and contact 

information. In the case of submissions 

by an anonymous whistleblower, the 

form would require the name and 

contact information of the 

whistleblower’s attorney instead of the 

whistleblower’s identifying information 

in proposed Items B1 though B4. This 

section could also be completed in cases 

where a whistleblower’s identity is 

known but the whistleblower is 

represented by an attorney in the matter. 

Proposed Items C1 through C3 would 

request information concerning the 

information submitted by the 

whistleblower to the SEC. Item C1 

would require the whistleblower to 

indicate the manner in which the 

information was submitted to the 

Commission. Proposed Item C2 would 

ask for the Tip, Complaint or Referral 

(‘‘TCR’’) number assigned to the 

whistleblower’s submission. The 

Commission expects that the TCR 

number would be generated 

automatically in cases where the 

whistleblower submits his information 

online through the Commission’s 

Electronic Data Collection System or, in 

the case of hard copy submissions, 

would be provided to the whistleblower 

in a written confirmation sent by the 

Commission staff. In instances where a 

whistleblower submits both forms in 

hard copy and thus does not have access 

to the TCR number at the time of 

submission, the forms would be linked 

together by virtue of having been 

included in the same mailing. Proposed 

Items C3 would ask a whistleblower to 

identify any communications the 

whistleblower or his counsel may have 

had with the Commission concerning 

the matter since submitting the 

information. Proposed Item C4 asks 

whether the whistleblower has provided 

the same information being provided to 

the Commission to any other agency or 

organization and, if so, requests details 

concerning the submission, including 

the name and contact information for 

the point of contact at the agency or 

organization, if known. Proposed Items 

D1 through D9 would require the 

whistleblower to make certain 

representations concerning the 

whistleblower’s eligibility for an award. 

Finally, the form would require the 

sworn declarations from the 

whistleblower and the whistleblower’s 

counsel discussed above. In proposed 

Item E, the whistleblower would be 

required to declare under penalty of 

perjury that the information contained 

on Form WB–DEC, and all information 

submitted to the SEC is true, correct and 

complete to the best of the 

whistleblower’s knowledge, information 

and belief. In addition, the 

whistleblower would acknowledge his 

understanding that he may be subject to 

prosecution and ineligible for a 

whistleblower award if, in the 

whistleblower’s submission of 

information, other dealings with the 

SEC, or dealings with another authority 

in connection with a related action, the 

whistleblower knowingly and willfully 

makes any false, fictitious, or fraudulent 

statements or representations, or uses 

any false writing or document knowing 

that the writing or document contains 

any false, fictitious, or fraudulent 

statement or entry. 

The counsel certification in proposed 

Item F would require an attorney for an 

anonymous whistleblower to certify that 

the attorney has verified the identity of 

the whistleblower who completed Form 


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WB–DEC in connection with the 

information submitted to the SEC by 

viewing the whistleblower’s valid, 

unexpired government issued 

identification, that the attorney has 

reviewed the whistleblower’s Form 

WB–DEC for completeness and 

accuracy, and that the attorney will 

retain an original, signed copy of the 

Form WB–DEC completed by the 

whistleblower in his or her records. 

As explained above, the Commission 

proposes to allow two alternative 

methods of submission of a 

whistleblower’s information. A 

whistleblower would have the option of 

submitting the information 

electronically through the Commission’s 

Electronic Data Collection System or by 

sending or faxing Form TCR to the 

Whistleblower Office. 

Form WB–DEC could be submitted 

electronically, in accordance with 

instructions set forth on the 

Commission’s Web site or, alternatively, 

by mailing or faxing the form to the 

Whistleblower Office. 

3. Perfecting Whistleblower Status for 

Submissions Made Before Effectiveness 

of the Rules 

As previously discussed, Section 

924(b) of Dodd-Frank states that 

information provided to the 

Commission in writing by a 

whistleblower after the date of 

enactment but before the effective date 

of these proposed rules retains the 

status of original information. The 

Commission has already received 

numerous tips from potential 

whistleblowers after the date of 

enactment of Dodd-Frank. Proposed 

Rule 21F–9(d) would provide a 

mechanism by which whistleblowers 

who fall into this category could perfect 

their status as whistleblowers under the 

Commission’s award program once final 

rules are adopted. Paragraph (d)(1) 

requires a whistleblower who provided 

original information to the Commission 

in a format or manner other than that 

required by paragraph (a) of Rule 21F– 

9 to either submit the information 

electronically through the Commission’s 

Electronic Data Collection System or to 

submit a completed Form TCR within 

one hundred twenty (120) days of the 

effective date of the proposed rules and 

to otherwise follow the procedures set 

forth in paragraph (b) of Proposed Rule 

21F–9. If the whistleblower provided 

the original information to the 

Commission in the format or manner 

required by paragraph (a) of Rule 21F– 

9, paragraph (d)(2) would require the 

whistleblower to submit Form WB–DEC 

within one hundred twenty (120) days 

of the effective date of the proposed 

rules in the manner set forth in 

paragraph (b) of Proposed Rule 21F–9. 

Request for Comment: 

32. Although the Commission is 

proposing alternative methods of 

submission, we expect that electronic 

submissions would dramatically reduce 

our administrative costs, enhance our 

ability to evaluate tips (generally and 

using automated tools), and improve our 

efficiency in processing whistleblower 

submissions. Accordingly, we solicit 

comment on whether it would be 

appropriate to eliminate the fax and 

mail option and require that all 

submissions be made electronically. 

Would the elimination of submissions 

by fax and mail create an undue burden 

for some potential whistleblowers? 

33. Is there other information that the 

Commission should elicit from 

whistleblowers on Proposed Forms TCR 

and WB–DEC? Are there categories of 

information included on these forms 

that are unnecessary, or should be 

modified? 

34. Is the requirement that an attorney 

for an anonymous whistleblower certify 

that the attorney has verified the 

whistleblower’s identity and eligibility 

for an award appropriate? Is there an 

alternative process the Commission 

should consider that would accomplish 

its goal of ensuring that it is 

communicating with a legitimate 

whistleblower? 

35. Is the Commission’s proposed 

process for allowing whistleblowers 120 

days to perfect their status in cases 

where the whistleblower provided 

original information to the Commission 

in writing after the date of enactment of 

Dodd-Frank but before adoption of the 

proposed rules reasonable? Should the 

period be made shorter (e.g., 30 or 60 

days) or longer (e.g., 180 days)? 

36. Are there any ways we can 

streamline and make the required 

procedures more user-friendly? 

J. Proposed Rule 21F–10—Procedures 

for Making a Claim for a Whistleblower 

Award in SEC Actions That Result in 

Monetary Sanctions in Excess of 

$1,000,000 

Proposed Rule 21F–10 describes the 

steps a whistleblower would be required 

to follow in order to make a claim for 

an award in relation to a Commission 

action. In addition, the rule describes 

the Commission’s proposed claims 

review process, which includes the 

proposed administrative appeals 

process. 

The following flow chart represents a 

general overview of the proposed 

process: 


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72All references to ‘‘days’’ refer to calendar days. 

73See, e.g., Yuen v. U.S., 825 F.2d 244 (9th Cir. 

1987) (taxpayer barred from recovery due to failure 

to timely file a written request for refund). 

The proposed process would begin 

with the publication of a ‘‘Notice of a 

Covered Action’’ (‘‘Notice’’) on the 

Commission’s Web site. Whenever a 

judicial or administrative action brought 

by the Commission results in the 

imposition of monetary sanctions 

exceeding $1,000,000, the 

Whistleblower Office will cause this 

Notice to be published on the 

Commission’s Web site subsequent to 

the entry of a final judgment or order in 

the action that by itself, or collectively 

with other judgments or orders 

previously entered in the action, 

exceeds the $1,000,000 threshold. If the 

monetary sanctions are obtained 

without a judgment or order—as in the 

case of a contribution made pursuant to 

Section 308(b) of the Sarbanes-Oxley 

Act of 2002—the Notice would be 

published within thirty (30) days of the 

deposit of monetary sanctions into a 

disgorgement or other fund pursuant to 

Section 308(b) that causes total 

monetary sanctions in the action to 

exceed $1,000,000. The Commission’s 

proposed rule requires claimants to file 

their claim for an award within sixty 

(60) days of the date of the Notice.72 A 

claimant’s failure to timely file a request 

for a whistleblower award would bar 

that individual later seeking a 

recovery.73 The Commission anticipates 

that, at the time a Notice of Covered 

Action is posted, the staff will also 

attempt to contact persons who have 

filed a Form WB DEC in relation to the 

case, in order to give them additional 

notice of the opportunity to submit a 

claim for award. 

Paragraph (b) of Proposed Rule 21F– 

10 describes the procedure for making a 


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74 15 U.S.C. 78u–6(d)(2)(B). 

75 Designated staff would likely include, but need 

not be limited to, Commission staff members who 

were responsible for investigating and prosecuting 

the covered action. 

76This is not intended to limit the authority of 

the staff to require confirmation of eligibility or the 

satisfaction of other conditions at any earlier time. 

See discussion of Proposed Rule 21F–8(d). 

77See, e.g., Benoit v. U.S. Dept. of Agriculture, 

608 F.3d 17, 21–24 (DC Cir. 2010) (dismissing 

appeal because petitioners failed to exhaust 

claim for an award. Specifically, a 

claimant would be required to submit a 

claim for an award on proposed Form 

WB–APP, Application for Award for 

Original Information Provided Pursuant 

to § 21F of the Securities Exchange Act 

of 1934. Proposed Form WB–APP, and 

the instructions thereto, will elicit 

information concerning a 

whistleblower’s eligibility to receive an 

award at the time the whistleblower 

files his claim. The purpose of the form 

is, among other things, to provide an 

opportunity for the whistleblower to 

‘‘make his case’’ for why he is entitled 

to an award by describing the 

information and assistance he has 

provided and its significance to the 

Commission’s successful action. 

Proposed Items A1 through A3 require 

the claimant to provide basic identifying 

information, including first and last 

name and contact information. Proposed 

Items B1 through B4 would request the 

name and contact information for the 

whistleblower’s attorney, if applicable. 

Proposed Items C1 and C2 would 

request information concerning the 

original tip or complaint underlying the 

claim, including the TCR number, the 

date the information was submitted and 

the subject of the tip, complaint or 

referral. Proposed Items D1 through D3 

would request information concerning 

the Notice of Covered Action to which 

the claim relates, including the date of 

the notice, notice number, and the name 

and case number of the matter to which 

the notice relates. Proposed Items E1 

through E3 would request information 

concerning related actions. A 

whistleblower would be required to 

complete Section D in cases where the 

whistleblower’s claim was submitted in 

connection with information submitted 

to another agency or organization in a 

related action (the questions pertaining 

to related actions are explained in the 

discussion of proposed Rule 21F–11, 

below). Proposed Items F1 through F9 

would require the claimant to make 

certain representations concerning the 

claimant’s eligibility to receive an award 

at the time the claim is made. In Item 

G, a claimant may set forth the grounds 

for the claimant’s belief that he is 

entitled to an award in connection with 

the information submitted to the 

Commission, or to another agency or 

organization in a related action. Finally, 

item H would contain a declaration, to 

be signed by the claimant, certifying 

that the information contained on the 

form is true, correct and complete to the 

best of the claimant’s knowledge, 

information and belief. The declaration 

would further acknowledge the 

claimant’s understanding that he may be 

subject to prosecution and ineligible for 

a whistleblower award for knowingly 

and willfully making any false, 

fictitious, or fraudulent statements or 

representations in his or her submission 

or dealings with the SEC or other 

authority. 

Paragraph (b) of Proposed Rule 21F– 

10 provides that a claim on Form WB– 

APP, including any attachments, must 

be received by the Whistleblower Office 

within sixty (60) days of the date of the 

Notice of Covered Action in order to be 

considered for an award. 

Paragraph (c) requires a whistleblower 

who submitted information to the 

Commission anonymously to disclose 

his identity to the Commission on 

proposed Form WB–APP and to verify 

his identity in a form and manner that 

is acceptable to the Whistleblower 

Office prior to the payment of an award. 

This requirement is derived from 

Subsection 21F(d)(2)(B) of the Exchange 

Act.74

Paragraph (d) of Proposed Rule 21F– 

10 describes the Commission’s claims 

review process. The claims review 

process would begin once the time for 

filing any appeals of the Commission’s 

judicial or administrative action has 

expired, or where an appeal has been 

filed, after all appeals in the action have 

been concluded. 

Under the proposed process, the 

Whistleblower Office and designated 

Commission staff (defined in Proposed 

Rule 21F–10 as the ‘‘Claims Review 

Staff’’) 75 would evaluate all timely 

whistleblower award claims submitted 

on Form WB–APP. In connection with 

this process, the Whistleblower Office 

could require that claimants provide 

additional information relating to their 

eligibility for an award or satisfaction of 

any of the conditions for an award, as 

set forth in Proposed Rule 21F–8(b).76

Following that evaluation, the 

Whistleblower Office would send any 

claimant a Preliminary Determination 

setting forth a preliminary assessment as 

to whether the claim should be allowed 

or denied and, if allowed, setting forth 

the proposed award percentage amount. 

The proposed rule would allow a 

claimant the opportunity to contest the 

Preliminary Determination made by the 

Claims Review Staff. Under paragraph 

(e) of Proposed Rule 21F–10, the 

claimant could take any of the following 

steps: 

• Within thirty (30) days of the date 

of the Preliminary Determination, the 

claimant may request that the 

Whistleblower Office make available for 

the claimant’s review the materials that 

formed the basis of the Claims Review 

Staff’s Preliminary Determination. The 

Whistleblower Office would make these 

materials available to the claimant 

subject to any redactions necessary to 

comply with any statutory restrictions 

or protect the Commission’s law 

enforcement and regulatory functions. 

The Whistleblower Office also could 

require the claimant to sign a 

confidentiality agreement (as described 

in Rule 21F–8) prior to providing these 

materials. 

• Within thirty (30) days of the date 

of the Preliminary Determination, or if 

a request to review materials is made 

pursuant to paragraph (1) above, then 

within thirty (30) days of the 

Whistleblower Office making those 

materials available for the claimant’s 

review, a claimant may submit a written 

response to the Whistleblower Office 

setting forth the grounds for the 

claimant’s objection to either the denial 

of an award or the proposed amount of 

an award. The claimant may also 

include documentation or other 

evidentiary support for the grounds 

advanced in his response. 

• Within thirty (30) days of the date 

of the Preliminary Determination, the 

claimant may request a meeting with the 

Whistleblower Office. However, such 

meetings are not required and the 

Whistleblower Office may in its sole 

discretion decline the request. 

Paragraph (f) of Proposed Rule 21F–10 

makes clear that if a claimant fails to 

submit a timely response pursuant to 

paragraph (e), then the Preliminary 

Determination of the Claims Review 

Staff would be deemed the Final Order 

of the Commission (except where the 

Preliminary Determination 

recommended an award, in which case 

the Preliminary Determination will be 

deemed a Proposed Final 

Determination, which would make it 

subject to review by the Commission 

under paragraph (h). In addition, a 

claimant’s failure to submit a timely 

response to a Preliminary Determination 

where the determination was to deny an 

award would constitute a failure to 

exhaust the claimant’s administrative 

remedies, and the claimant would be 

prohibited from pursuing a judicial 

appeal.77


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administrative remedies with respect to their 

monetary claims against the government). 

Paragraph (g) of Proposed Rule 21F– 

10 describes the procedure in cases 

where a claimant submits a timely 

response pursuant to Paragraph (f). In 

such cases, the Claims Review Staff 

would consider the issues and grounds 

advanced in the claimant’s response, 

along with any supporting 

documentation provided by the 

claimant, and would prepare a Proposed 

Final Determination. Paragraph (h) 

provides that the Whistleblower Office 

would notify the Commission of the 

Proposed Final Determination, but 

would not make the Proposed Final 

Determination public. Within thirty (30) 

days thereafter, any Commissioner 

would be able to request that the 

Proposed Final Determination be 

reviewed by the Commission. If no 

Commissioner requests such a review 

within the 30-day period, then the 

Proposed Final Determination would 

become the Final Order of the 

Commission. In the event a 

Commissioner requests a review, the 

Commission would review the record 

that the staff relied upon in making its 

determination, including the claimant’s 

previous submissions to the 

Whistleblower Office. On the basis of its 

review of the record, the Commission 

would issue its Final Order, which the 

Commission’s Secretary will provide to 

the claimant. 

The objective of this administrative 

appeals process is to provide a 

transparent award determination 

process and provide whistleblowers full 

opportunity to make a written statement 

to the Commission for its consideration 

when it makes eligibility and award 

determinations. The proposed 

administrative process would enable a 

whistleblower to appeal to the 

Commission a preliminary 

determination by the Whistleblower 

Office concerning the percentage 

amount of an award; however, this 

process would in no way limit the 

Commission’s discretion to make a 

determination with respect to the 

amount of an award. Under Section 

21F(f) of the Exchange Act, 

determinations of the amount of an 

award are not appealable to the courts 

when the Commission has followed the 

statutory requirement to award between 

10 and 30 percent of the monetary 

sanctions collected. 

K. Proposed Rule 21F–11—Procedures 

for Determining Awards Based Upon a 

Related Action 

Proposed Rule 21F–3(b) discussed 

above explains that the Commission is 

required to pay an award on amounts 

collected in certain related actions. 

Proposed Rule 21F–11 sets forth the 

procedures for determining awards 

based upon related actions. Paragraph 

(a) informs a whistleblower who is 

eligible to receive an award following a 

Commission action that results in 

monetary sanctions totaling more than 

$1,000,000 that the whistleblower may 

also be eligible to receive an award 

based on the monetary sanctions that 

are collected from a related action. 

Paragraph (b) of Proposed Rule 21F– 

11 describes the procedures for making 

a claim for an award in a related action. 

The process essentially mirrors the 

procedure for making a claim in 

connection with a Commission action 

and requires the claimant to submit the 

claim on Form WB–APP. In addition to 

the questions previously described in 

our discussion of proposed Rule 21F– 

10, the claimant in a related action 

would be required to complete Section 

D of proposed form WB–APP. Proposed 

Items D1 through D4 request the name 

of the agency or organization to which 

the whistleblower provided the 

information and the date the 

information was provided, the name 

and telephone number for a contact at 

the agency or organization, if available, 

and the case name, action number and 

date the related action was filed. 

Paragraph (b) of Proposed Rule 21F– 

11 sets forth the deadline by which a 

claimant must file his or her Form WB– 

APP in a related action. Specifically, 

under proposed paragraph (b)(1), if a 

final order imposing monetary sanctions 

has been entered in a related action at 

the time the claimant submits the claim 

for an award in connection with a 

Commission action, the claimant would 

be required to submit the claim for an 

award in that related action on the same 

Form WB–APP used for the Commission 

action. Under proposed paragraph 

(b)(2), if a final order imposing 

monetary sanctions in a related action 

has not been entered at the time the 

claimant submits a claim for an award 

in connection with a Commission 

action, then the claimant would be 

required to submit the claim on Form 

WB–APP within sixty (60) days of the 

issuance of a final order imposing 

sanctions in the related action. 

The Whistleblower Office may request 

additional information from the 

claimant in connection with the claim 

for an award in a related action to 

demonstrate that the claimant directly 

(or through the Commission) voluntarily 

provided the governmental agency, 

regulatory authority or self-regulatory 

organization the same original 

information that led to the 

Commission’s successful covered 

action, and that this information led to 

the successful enforcement of the 

related action. In addition, the 

Whistleblower Office may, in its 

discretion, seek assistance and 

confirmation from the other agency in 

making this determination. 

Paragraphs (d) through (i) of Proposed 

Rule 21F–11 describe the Commission’s 

claims review process in related actions. 

The Commission proposes to utilize the 

same claims review process in related 

actions that it will utilize in connection 

with claims submitted in connection 

with a covered Commission action. 

The following represents an overview 

of the proposed process: 


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78 15 U.S.C. 78u–6(f). 

79 15 U.S.C. 78y(a)(1). 

80 15 U.S.C. 78u–6(g). 

81 15 U.S.C. 78u–6(b)(1). 

L. Proposed Rule 21F–12—Appeals 

Section 21F of the Exchange Act 

provides for certain rights of appeal of 

orders of the Commission with respect 

to whistleblower awards.78 Paragraph 

(a) of Proposed Rule 21F–12 tracks this 

provision and describes claimants’ 

appeal rights. A decision of the 

Commission regarding the amount of an 

award is not appealable when the 

Commission has followed the statutory 

mandate to award between 10 and 30 

percent of the monetary sanctions 

collected. A decision regarding whether 

or to whom to make an award may be 

appealed to an appropriate court of 

appeals within 30 days after the 

Commission issues its final decision. 

Under Section 25(a)(1) of the Exchange 

Act,79 appeals of final orders of the 

Commission entered pursuant to the 

Exchange Act may be made to the 

United States Court of Appeals for the 

District of Columbia Circuit, or to the 

circuit where the aggrieved person 

resides or has his principal place of 

business. 

Paragraph (b) of Proposed Rule 21F– 

12 designates the materials that shall be 

included in the record on any appeal. 

They include the Whistleblower Office’s 

Preliminary Determination, any 

materials submitted by the claimant or 

claimants (including the claimant’s 

Forms TCR, WB–DEC, WB–APP, and 

materials filed in response to the 

Preliminary Determination), and any 

other materials that supported the Final 

Order of the Commission, with the 

exception of any internal deliberative 

process materials that are prepared 

exclusively to assist the Commission in 

deciding the claim, such as the staff’s 

Proposed Final Determination in the 

event it does not become the Final 

Order. 

M. Proposed Rule 21F–13—Procedures 

Applicable to Payment of Awards 

Proposed Rule 21F–13 (a) addresses 

the timing for payment of an award to 

a whistleblower. Any award made 

pursuant to the rules would be paid 

from the Securities and Exchange 

Commission Investor Protection Fund 

(the ‘‘Fund’’) established by Section 

21F(g) of the Exchange Act.80 Paragraph 

(b) provides that a recipient of a 

whistleblower award would be entitled 

to payment on the award only to the 

extent that a monetary sanction is 

collected in the Commission action or in 

a related action upon which the award 

is based. This requirement is derived 

from Section 21F(b)(1) of the Exchange 

Act,81 which provides that an award is 

based upon the monetary sanctions 

collected in the Commission action or 

related action. 

Paragraph (c) states that any payment 

of an award for a monetary sanction 

collected in a Commission action would 

be made following the later of either the 

completion of the appeals process for all 

whistleblower award claims arising 

from the Notice of Covered Action for 

that action, or the date on which the 

monetary sanction is collected. 

Likewise, the payment of an award for 

a monetary sanction collected in a 


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related action would be made following 

the later of either the completion of the 

appeals process for all whistleblower 

award claims arising from the related 

action, or the date on which the 

monetary sanction is collected. This 

provision is intended to cover situations 

where a single action results in multiple 

whistleblowers claims. Under this 

scenario, if one whistleblower appeals a 

Final Determination of the Commission 

denying the whistleblower’s claim for 

an award, the Commission would not 

pay any awards in the action until that 

whistleblower’s appeal has been 

concluded, because the disposition of 

that appeal could require the 

Commission to reconsider its 

determination and thereby could affect 

all payments for that action. 

Paragraph (d) of Proposed Rule 21F– 

13 describes how the Commission 

would address situations where there 

are insufficient amounts available in the 

Fund to pay an award to a 

whistleblower or whistleblowers within 

a reasonable period of time of when 

payment should otherwise be made. In 

this situation, the whistleblower or 

whistleblowers would be paid when 

amounts become available in the Fund, 

subject to the terms set forth in 

proposed paragraphs (d)(1) and (d)(2). 

Under proposed paragraph (d)(1), where 

multiple whistleblowers are owed 

payments from the Fund based on 

awards that do not arise from the same 

Notice of Covered Action or related 

action, priority in making payment on 

these awards would be determined 

based upon the date that the collections 

for which the whistleblowers are owed 

payments occurred. If two or more of 

these collections occur on the same 

date, those whistleblowers owed 

payments based on these collections 

would be paid on a pro rata basis until 

sufficient amounts become available in 

the Fund to pay their entire payments. 

Under proposed paragraph (d)(2), where 

multiple whistleblowers are owed 

payments from the Fund based on 

awards that arise from the same Notice 

of Covered Action or related action, they 

would share the same payment priority 

and would be paid on a pro rata basis 

until sufficient amounts become 

available in the Fund to pay their entire 

payments. 

As noted above, whistleblower 

awards will be paid solely from the 

Fund. Section 21F(g)(3) of the Exchange 

Act establishes the mechanism for 

funding the Fund. In most 

circumstances, the Fund will be funded 

with monetary sanctions that are 

collected by the Commission in its 

judicial and administrative actions and 

that are not distributed to victims of a 

violation of the securities laws 

underlying such actions. However, if the 

balance of the Fund is not sufficient to 

satisfy a whistleblower award, the law 

requires that there 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 in the Commission 

action on which the award is based. 

Therefore, it is possible for there to be 

circumstances in which monies that 

otherwise might have been distributed 

to victims pursuant to a Commission 

action could be required to be deposited 

into or credited to the Fund to pay a 

whistleblower award. In this situation, 

there would be a tension between the 

competing interests of paying an award 

to a whistleblower (as provided for in 

Section 21F) and compensating victims 

with monies collected from wrongdoers 

(as recognized in Section 308 of the 

Sarbanes-Oxley Act). 

Request for Comment: 

37. We request comment on the 

significance of the tension between the 

interests of whistleblowers and victims 

in this circumstance, the likelihood that 

this situation would arise, and whether 

there is anything that the Commission 

can or should do to mitigate this 

tension. 

N. Proposed Rule 21F–14—No Amnesty 

Proposed Rule 21F–14 provides 

notice that the provisions of Section 21F 

of the Exchange Act do not provide 

amnesty to individuals who provide 

information to the Commission relating 

to a violation of the securities laws. 

Whistleblowers who have not 

participated in misconduct will of 

course not need amnesty. However, 

some whistleblowers who provide 

original information that significantly 

aids in detecting and prosecuting 

sophisticated securities fraud schemes 

may themselves be participants in the 

scheme who could be subject to 

Commission enforcement actions. These 

individuals will not be immune from 

prosecution. Rather, the Commission 

will analyze the unique facts and 

circumstances of each case in 

accordance with its Policy Statement 

Concerning Cooperation by Individuals 

in its Investigations and Related 

Enforcement Actions, 17 CFR 202.12, to 

determine whether, how much, and in 

what manner to credit cooperation by 

whistleblowers who have participated 

in misconduct. This Policy Statement 

provides an incentive to report 

information to the Commission 

notwithstanding that the whistleblower 

program does not provide amnesty. 

O. Proposed Rule 21F–15—Awards to 

Whistleblowers Who Engage in Culpable 

Conduct 

Proposed Rule 21F–15 states that in 

determining whether the required 

$1,000,000 threshold has been satisfied 

for purposes of making an award to a 

whistleblower, the Commission will not 

count any monetary sanctions that the 

whistleblower is ordered to pay, or that 

are ordered against any entity whose 

liability is based substantially on 

conduct that the whistleblower directed, 

planned, or initiated. The Commission 

also will not add those amounts to the 

total monetary sanctions collected in the 

action for purposes of calculating any 

payment to the culpable individual. The 

rationale for this limitation is to prevent 

wrongdoers from financially benefiting 

by, in essence, blowing the whistle on 

their own misconduct. Because the 

common understanding of a 

whistleblower is one who reports 

misconduct by another person, we are 

preliminarily of the view that it would 

not be consistent with the purposes of 

the statute to pay awards to persons 

based on monetary sanctions arising 

from their own misconduct. A logical 

corollary to this principle is that a 

whistleblower also should not be paid 

an award based on monetary sanctions 

paid by an entity whose liability 

resulted from the whistleblower’s 

conduct. 

Request for Comment: We request 

comment on whether the limitations 

provided in Proposed Rule 21F–15 are 

appropriate. 

38. For example, in determining 

whether the $1,000,000 threshold for a 

covered action has been met, should we 

exclude monetary sanctions ordered 

against an entity whose liability is based 

substantially on conduct that the 

whistleblower directed, planned, or 

initiated? Should we exclude those 

amounts from monetary sanctions 

collected for purposes of making 

payments to whistleblowers? 

39. Is the proposed exclusion of 

monetary sanctions ordered against an 

entity whose liability is based 

substantially on conduct that the 

whistleblower directed, planned, or 

initiated appropriate? Is the proposed 

exclusion sufficient to permit the 

Commission to deny awards in cases 

where the payment of an award would 

be against public policy? Should we 

instead exclude any wrongdoer from 

being eligible to receive an award 

categorically, or in particular 

circumstances? Should an individual’s 

level of culpability be considered as a 

factor in determining whether the 

person is eligible for an award? Are 


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82See, e.g., In re JDS Uniphase Corp. Sec. Litig., 

238 F.Supp.2d 1127, 1137 (N.D.Cal.2002) (‘‘To the 

extent that [the confidentiality] agreements 

preclude former employees from assisting in 

investigations of wrongdoing that have nothing to 

do with trade secrets or other confidential business 

information, they conflict with public policy in 

favor of allowing even current employees to assist 

in securities fraud investigations.’’); Chambers v. 

Capital Cities/ABC, 159 F.R.D. 441, 444 

(S.D.N.Y.1995) (holding that ‘‘it is against public 

policy for parties to agree not to reveal * * * facts 

relating to alleged or potential violations of 

[Federal] law’’). 

83Model Rules of Prof’l Conduct R. 4.2. The 

primary purpose of ABA Model Rule 4.2 is to 

protect the attorney-client relationship and to 

protect represented persons, in the absence of their 

lawyers, from being taken advantage of by lawyers 

who are not representing their interests. 

84See generally Upjohn Co. v. United States, 449 

U.S. 383 (1981). 

85Comment 7 to ABA Model Rule 4.2 addresses 

this issue: 

In the case of a represented organization, this 

Rule prohibits communications with a constituent 

of the organization who supervises, directs or 

regularly consults with the organization’s lawyer 

concerning the matter or has authority to obligate 

the organization with respect to the matter or whose 

act or omission in connection with the matter may 

be imputed to the organization for purposes of civil 

or criminal liability. Consent of the organization’s 

lawyer is not required for communication with a 

former constituent. If a constituent of the 

organization is represented in the matter by his or 

her own counsel, the consent by that counsel to a 

communication will be sufficient for purposes of 

this Rule. Compare Rule 3.4(f). In communicating 

with a current or former constituent of an 

organization, a lawyer must not use methods of 

obtaining evidence that violate the legal rights of 

the organization. 

86Comment 5 to the ABA Model Rule 4.2 

specifically carves out a potential exception for 

‘‘investigative activities of lawyers representing 

governmental entities, directly or through 

investigative agents, prior to the commencement of 

criminal or civil enforcement proceedings.’’ The 

commentary, and most state professional 

responsibility rules, do not specify which 

governmental investigative activities are exempt. 

87See, e.g., Exchange Act Section 21F (b)–(d) and 

(h), 15 U.S.C. 78u–6 (b)–(d) and (h). 

88As noted, ABA Model Rule 4.2 allows for 

contacts with represented persons without the 

consent of the person’s lawyer if such contacts are 

‘‘authorized by law.’’ Every state bar ethics rules, in 

accordance with ABA Model Rule 4.2, has some 

variation of an authorized by law exception. Thus, 

in the context of communications initiated by a 

whistleblower who is also the director, officer, 

member, agent, or employee of an entity that has 

counsel, the proposed rule would make clear that 

contacts and communications between these 

individuals and the staff are ‘‘authorized by law.’’ 

89The proposed rule is not intended, and will not 

be used, to obtain otherwise privileged information 

about the entity. See SEC Division of Enforcement 

Manual sec. 3.3.1. 

there other ways in which we should 

limit the payment of awards to culpable 

individuals? 

P. Proposed Rule 21F–16—Staff 

Communications With Whistleblowers 

Proposed Rule 21F–16(a) provides 

that no person may take any action to 

impede a whistleblower from 

communicating directly with the 

Commission staff about a potential 

securities law violation, including 

enforcing, or threatening to enforce, a 

confidentiality agreement (other than 

agreements dealing with information 

covered by § 240.21F–4(b)(4)(i) & (ii) of 

this chapter related to the legal 

representation of a client) with respect 

to such communications. As noted, the 

Congressional purpose underlying 

Section 21F of the Exchange Act is to 

encourage whistleblowers to report 

potential violations of the securities 

laws by providing financial incentives, 

prohibiting employment-related 

retaliation, and providing various 

confidentiality guarantees. Efforts to 

impede a whistleblower’s direct 

communications with Commission staff 

about a potential securities law 

violation, however, would appear to 

conflict with this purpose. For example, 

an attempt to enforce a confidentiality 

agreement against a whistleblower to 

prevent his or her communications with 

Commission staff about a potential 

securities law violation could inhibit 

those communications even when such 

an agreement would be legally 

unenforceable,82 and would undermine 

the effectiveness of the countervailing 

incentives that Congress established to 

encourage whistleblowers to disclose 

potential violations to the Commission. 

Proposed Rule 21F–16(a) is designed to 

prevent this result. The proposed rule 

would not, however, address the 

effectiveness or enforceability of 

confidentiality agreements in situations 

other than communications with the 

Commission about potential securities 

law violations. Proposed Rule 21F–16(a) 

is not intended to prevent a professional 

or religious organization from 

responding to a breach of a recognized 

common-law or statutory privilege (e.g., 

psychiatrist-patient, priest-penitent) by 

one of its members. 

Proposed Rule 21F–16(b) would 

clarify the staff’s authority to 

communicate directly with 

whistleblowers who are directors, 

officers, members, agents, or employees 

of an entity that has counsel, and who 

have initiated communication with the 

Commission related to a potential 

securities law violation. The proposed 

rule would make clear that the staff is 

authorized to communicate directly 

with these individuals without first 

seeking the consent of the entity’s 

counsel. The objective of proposed Rule 

21F–16 is to implement several 

important policies inherent in Section 

21F in a manner consistent with the 

state bar ethics rules governing the 

professional responsibilities of lawyers. 

Every jurisdiction that regulates the 

professional responsibility of lawyers 

has adopted some variation of ABA 

Model Rule 4.2, which provides: ‘‘In 

representing a client, a lawyer shall not 

communicate about the subject of the 

representation with a person the lawyer 

knows to be represented by another 

lawyer in the matter, unless the lawyer 

has the consent of the other lawyer or 

is authorized to do so by law or a court 

order.’’ 83

In the context of organizational 

entities represented by lawyers,84 a 

difficulty in applying the various state 

versions of ABA Model Rule 4.2 is 

identifying those actors within the 

entity—such as directors or officers— 

that are the embodiment of the 

represented entity such that the 

proscription against contact applies.85

This is so in part because the various 

state bar ethics rules have differing 

definitions of which organizational 

constituents are covered by Rule 4.2.86

As explained above, however, Section 

21F of the Exchange Act evinces a 

Congressional purpose to facilitate the 

disclosure of information to the 

Commission relating to potential 

securities law violations and to preserve 

the confidentiality of those who do so.87

This Congressional policy would be 

significantly impaired were the 

Commission required to seek the 

consent of an entity’s counsel before 

speaking with a whistleblower who 

contacts us and who is a director, 

officer, member, agent, or employee of 

the entity. Similarly, whistleblowers 

falling within these categories could be 

less inclined to report possible 

securities law violations if they believed 

there was a risk that the Commission 

staff might be required to request 

consent of the entity’s counsel—thus 

disclosing the whistleblower’s 

identity—before speaking to him or her. 

For this reason, Section 21F 

necessarily authorizes the Commission 

to communicate directly with these 

individuals without first obtaining the 

consent of the entity’s counsel. 

Proposed Rule 21F–16(b) would clarify 

this authority by providing that, in the 

context of whistleblower-initiated 

contacts with the Commission, all 

discussions with a director, officer, 

member, agent, or employee of an entity 

that has counsel are ‘‘authorized by 

law’’ 88 and, will therefore not require 

consent of the entity’s counsel as might 

otherwise be required by rules of 

professional conduct.89

Request for Comment: We request 

comment on whether the provisions 

dealing with whistleblowers’ 

communications with the Commission 


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90 44 U.S.C. 3501 et seq. 

91 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

staff provided in Proposed Rule 21F–16 

are appropriate. 

40. Should these provisions be 

narrowed and, if so, why and in what 

manner? Would these provisions 

encourage whistleblowers to provide 

information to the Commission 

regarding potential securities law 

violations? Are there additional 

measures that the Commission could 

consider to encourage and facilitate 

whistleblowers’ communications with 

Commission staff? 

41. Should the Commission consider 

rules to address other potential issues 

that may arise from state bar 

professional responsibility rules when 

the Commission staff receives 

information about potential securities 

law violations from whistleblowers? For 

example, are there circumstances where 

the staff’s receipt of information from 

whistleblowers potentially conflicts 

with the state bar professional 

responsibility rules that are modeled on 

ABA Model Rules of Professional 

Responsibility 4.4(a) and 8.4(a)? If so, 

should the Commission consider 

promulgating rules to address these 

potential conflicts? 

III. General Request for Comment 

We request and encourage any 

interested person to submit comments 

on any aspect of our Proposed Rules. 

With respect to any comments, we note 

that they are of greatest assistance to our 

rulemaking initiative if accompanied by 

supporting data and analysis of the 

issues addressed in those comments and 

by alternatives to our proposals where 

appropriate. 

In addition, the Commission is 

seeking comment on whether it should 

promulgate rules regarding the 

interpretation or implementation of the 

anti-retaliation provisions of Section 

21(h) of the Exchange Act. If so, what 

specific rules should the Commission 

consider promulgating? 

42. Should the anti-retaliation 

protections set forth in Section 21F(h)(1) 

of the Exchange Act be applied broadly 

to any person who provides information 

to the Commission concerning a 

potential violation of the securities 

laws, or should they be limited by the 

various procedural or substantive 

prerequisites to consideration for a 

whistleblower award? Should the 

application of the anti-retaliation 

provisions be limited or broadened in 

any other ways? For example, should 

the Commission consider promulgating 

a rule to exclude frivolous or bad faith 

whistleblower claims from the 

protections afforded by the antiretaliation provisions? If so, what rules 

should be adopted to address these 

problems? 

43. Are there rule proposals that the 

Commission should consider 

promulgating to ensure that the antiretaliation provisions are not used to 

protect employees from otherwise 

appropriate employment actions (i.e., 

employment actions that are not based 

on reporting potential securities law 

violations)? 

IV. Paperwork Reduction Act 

Certain provisions of the proposed 

rule contain ‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act (‘‘PRA’’) of 

1995.90 An agency may not sponsor, 

conduct, or require a response to an 

information collection unless a 

currently valid Office of Management 

and Budget (‘‘OMB’’) control number is 

displayed. The Commission is 

submitting the proposed collections of 

information to OMB for review in 

accordance with the PRA.91 The titles 

for the collections of information are: (1) 

Form TCR (Tip, Complaint or Referral), 

(2) Form WB–DEC (Declaration 

Concerning Original Information 

Provided Pursuant to § 21F of the 

Securities Exchange Act of 1934), and 

(3) Form WB–APP (Application for 

Award for Original Information 

Provided Pursuant to § 21F of the 

Securities Exchange Act of 1934). Under 

Proposed Rules 21F–9, 10, and 11, all 

three proposed forms would be 

necessary to implement Section 21F of 

the Exchange Act; the forms allow a 

whistleblower to provide information to 

the Commission and its staff regarding 

(i) potential violations of the securities 

laws and (ii) the whistleblower’s 

eligibility for and entitlement to an 

award. 

A. Summary of Collection of 

Information 

Proposed Form TCR, submitted 

pursuant to Proposed Rule 21F–9, 

would request the following 

information: 

(1) Background information regarding 

the person submitting the TCR, 

including the person’s name contact 

information, and occupation; 

(2) If the person is represented by an 

attorney, the name and contact 

information for the person’s attorney (in 

cases of anonymous submissions the 

person must be represented by an 

attorney); 

(3) Information regarding the person 

or entity that is the subject of the tip, 

complaint or referral, including contact 

information; 

(4) Information regarding the tip, 

complaint or referral, including the date 

of occurrence of the event being 

described, whether the person is 

complaining about an entity with which 

he is or was associated as an officer, 

director, employee, consultant or 

contractor, whether the person has 

taken any prior actions regarding his 

complaint, facts in support of the 

allegations, any additional relevant 

information, a description of all 

supporting materials, an explanation of 

why the allegations described constitute 

a violation of the Federal securities 

laws, and, if relevant, the name of the 

issuer, and the name and type of 

security or investment involved; 

(5) A description of how the person 

submitting the original information 

learned about and/or obtained the 

information submitted and, if any 

information was obtained from a public 

source, a description of such source. 

Proposed Form WB–DEC, submitted 

pursuant to Proposed Rule 21F–9, 

would require the following 

information: 

(1) Background information regarding 

the person submitting the TCR, 

including the person’s name and contact 

information; 

(2) If the person is represented by an 

attorney, the name and contact 

information for the attorney (in cases of 

anonymous submissions the person 

must be represented by an attorney); 

(3) Details concerning the tip or 

complaint, including (A) the manner in 

which the information was submitted to 

the SEC, (B) the TCR number (required 

if the person submitted his information 

through the SEC Web site) and date 

submitted to the SEC, (C) the individual 

or entity to which the tip, complaint or 

referral relates, (D) whether the person 

or his counsel has had communications 

with the SEC concerning his matter, (E) 

the relevant SEC staff member with 

whom they communicated, and (F) if 

the person or his counsel provided the 

information to another agency or 

organization, the details of that 

communication, and the name and 

contact information for the point of 

contact at the agency or organization, if 

known; 

(4) A certification that the person 

submitting the original information: (A) 

Is not, or was not at the time the person 

acquired the original information 

submitted to the Commission, a 

member, officer or employee of (i) the 

Securities and Exchange Commission, 

the Comptroller of the Currency, the 

Board of Governors of the Federal 

Reserve System, the Federal Deposit 


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92This number is a staff estimate based upon the 

volume of tips, complaints or referrals received by 

the Commission on a monthly basis during the past 

year. The staff believes that the volume of tips, 

complaints and referrals the Commission has 

received more recently, and particularly in the 

months since the passage of Dodd-Frank, provides 

a more accurate basis for estimating future volumes. 

93This number is a staff estimate based upon the 

expectation that roughly 10 percent of all tips 

received by the Commission would be submitted in 

hard copy on proposed Form TCR. The staff 

anticipates that most whistleblowers would elect to 

submit their information electronically. The 

electronic submission of information would provide 

whistleblowers with increased ease of use and will 

allow whistleblowers to submit more detailed 

information in roughly the same amount of time it 

would take them to complete a hard copy Form 

TCR. Moreover, the Commission should be able to 

use the information submitted electronically more 

effectively and efficiently. For example, the 

Commission will be able to conduct electronic 

searches of information without first having to 

convert the data into an electronic format. 

Insurance Corporation, the Office of 

Thrift Supervision; (ii) the Department 

of Justice; (iii) the Public Company 

Accounting Oversight Board; (iv) any 

law enforcement organization; (v) any 

national securities exchange, registered 

securities association, registered 

clearing agency, the Municipal 

Securities Rulemaking Board; or (vi) a 

member, officer, or employee of a 

foreign government, any political 

subdivision, department, agency, or 

instrumentality of a foreign government, 

or any other foreign financial regulatory 

authority as that term is defined in 

Section 3(a)(52) of the Exchange Act of 

1934, 15 U.S.C. 78c(a)(52); (B) did not 

gain the information through the 

performance of an engagement required 

under the securities by an independent 

public accountant; (C) did not provided 

the information pursuant to a 

cooperation agreement with the SEC or 

another agency or organization; (D) is 

not a spouse, parent, child, or sibling of 

a member or employee of the 

Commission, and does not reside in the 

same household as a member or 

employee of the Commission; (E) did 

not acquire the information from any 

person described in Subsection (4)(A) 

through (D) above; (F) is not currently 

a subject or target of a criminal 

investigation, or has not been convicted 

of a criminal violation in connection 

with the information upon which the 

application for the award is based; and 

(G) provided the information before he 

(or anyone representing him) received 

any request, inquiry or demand from the 

SEC, Congress, or any other Federal, 

State or local authority, or any self 

regulatory organization, or the Public 

Company Accounting Oversight Board; 

(5) A declaration, signed under 

penalty of perjury under the laws of the 

United States, that the information 

provided to the Commission pursuant to 

Proposed Rule 21F–9 of this Subpart is 

true, correct and complete to the best of 

the person’s knowledge, information 

and belief; and 

(6) A counsel certification, certifying 

that the attorney has verified the 

identity of the whistleblower who 

completed Form WB–DEC by viewing 

the whistleblower’s valid, unexpired 

government issued identification, 

reviewed the whistleblower’s Form 

WB–DEC for completeness and 

accuracy, and will retain for his records 

an original, signed copy of the Form 

WB–DEC completed by the 

whistleblower. 

Proposed Form WB–APP, submitted 

pursuant to Proposed Rule 21F–10, 

would require the following 

information: 

(1) The applicant’s name, address and 

contact information; 

(2) The applicant’s social security 

number, if any; 

(3) If the person is represented by an 

attorney, the name and contact 

information for the attorney (in cases of 

anonymous submissions the person 

must be represented by an attorney); 

(4) Details concerning the tip or 

complaint, including (A) the manner in 

which the information was submitted to 

the SEC, (B) the subject of the tip, 

complaint or referral, (C) the TCR 

number, and (D) the date the TCR was 

submitted to the SEC; 

(5) Information concerning the Notice 

of Covered Action to which the claim 

relates, including (A) the date of the 

Notice, (B) the Notice number, and 

(C) the Case name and number; 

(6) For related actions, (A) the name 

and contact information for the agency 

or organization to which the person 

provided the original information; 

(B) the date the person provided his 

information, (C) the date the agency or 

organization filed the related action, 

(D) the case name and number of the 

related action, and (E) the name and 

contact information for the point of 

contact at the agency or organization, if 

known; 

(7) A certification of the person’s 

eligibility to receive an award as 

described in Subsection (4) concerning 

Form WB–DEC above; 

(8) An explanation of the reasons that 

the person believes he is entitled to an 

award in connection with his 

submission of information to the 

Commission, or to another agency in a 

related action including any additional 

information and supporting documents 

that may be relevant in light of the 

criteria for determining the amount of 

an award set forth in Proposed Rule 

21F–6 of this subpart, and any 

supporting documents; and 

(9) A declaration under penalty of 

perjury under the laws of the United 

States that the information provided in 

Form WB–APP is true, correct and 

complete to the best of the person’s 

knowledge, information and belief. 

B. Proposed Use of Information 

The collection of information on 

proposed Forms TCR, WB–DEC and 

WB–APP would be used to permit the 

Commission and its staff to collect 

information from whistleblowers 

regarding alleged violations of the 

Federal securities laws and to determine 

claims for whistleblower awards. 

C. Respondents 

The likely respondents to proposed 

Forms TCR and WB–DEC would be 

those individuals who alone, or jointly 

with others, have provided the 

Commission staff with information 

relating to a potential violation of the 

securities laws, and those who wish to 

be eligible for whistleblower awards 

under this Subpart, respectively. 

The likely respondents to proposed 

Form WB–APP would be those 

individuals who have provided the 

Commission staff with information 

relating to a potential violation of the 

securities laws by filing Forms TCR and 

WB–DEC signed under penalty of 

perjury, and who believe they are 

entitled to an award under this Subpart. 

D. Total Annual Reporting and 

Recordkeeping Burden 

i. Proposed Form TCR 

The Commission estimates that it 

would receive approximately 30,000 

completed Forms TCR and electronic 

submissions through the Electronic Data 

Collection System each year.92 Of those 

30,000 submissions, the Commission 

estimates that it would receive 

approximately 3,000 Forms TCR each 

year.93 Each respondent would submit 

only one Form TCR and would not have 

a recurring obligation. The Commission 

also estimates that it will take a 

whistleblower, on average, one hour to 

complete Form TCR. The completion 

time will depend largely on the 

complexity of the alleged violation and 

the amount of information the 

whistleblower possesses in support of 

the allegations. As a result, the 

Commission estimates that the 

estimated annual PRA burden of Form 

TCR is 3,000 hours. 

ii. Proposed Form WB–DEC 

Each whistleblower who has 

completed a Form TCR or made an 

electronic submission of information 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 70513 

94This number is a staff estimate. Because this is 

a new program, the staff does not have prior 

relevant data on which it can base its estimate. 

95This number is a staff estimate based upon the 

average number of actions during the past five years 

in which the Commission recovered monetary 

amounts, including penalties, disgorgement or 

prejudgment interest, in excess of $1,000,000 and 

the assumption that there should be an increase 

(roughly 30 percent) in the number of such actions 

as a result of the whistleblower program. 

96This number is a staff estimate based upon 

several expectations: first, that the Commission 

would receive Forms WB–APP in approximately 30 

percent of cases in which it posts a Notice of 

Covered Action because we expect that we will 

continue to bring a substantial number of 

enforcement cases that are not based on 

whistleblower information; and second, that we 

will receive approximately 3 Forms WB–APP in 

each of those cases. Because this is a new program, 

the staff does not have prior relevant data on which 

it can base these estimates. 

97This estimate is based, in part, on the 

Commission’s belief that most whistleblowers likely 

will not retain counsel to assist them in preparing 

the forms. 

98The bases for these assumed amounts are 

explained in Sections V.D.i., V.D.ii. and V.D.iii. 

above. 

99These amounts are based on the assumption, as 

noted above, that no more than 5 percent of all 

whistleblowers will be represented by counsel 

pursuant to an hourly fee arrangement. The 

estimate of the number of Forms TCR submitted by 

attorneys on behalf of whistleblowers may turn out 

to be high because it is likely that most attorneys 

will submit tips electronically, rather than use the 

hard-copy Form TCR. However, in the absence of 

any historical data to rely upon, the Commission 

assumes that attorneys will submit hard-copy 

Forms TCR in the same percentages as all 

whistleblowers. 

100The Commission uses this hourly rate for 

estimating the billing rates of securities lawyers for 

purposes of other rules. Absent historical data for 

the Commission to rely upon in connection with 

the whistleblower program, the Commission 

believes that this billing rate estimate is 

appropriate, recognizing that some attorneys 

representing whistleblowers may not be securities 

lawyers and may charge different average hourly 

rates. 

101The Commission expects that counsel will 

likely charge a whistleblower for additional time 

required to gather from the whistleblower or other 

sources relevant information needed to complete 

Forms TCR and WB–APP. Accordingly, the 

Commission estimates that on average counsel will 

bill a whistleblower two hours for the completion 

of Form TCR and ten hours for completion of Form 

WB–APP (even though the Commission estimates 

that a whistleblower will be able to complete Form 

TCR in one hour and Form WB–APP it two hours). 

through the Electronic Data Collection 

System and wishes to be eligible for an 

award under the Program would be 

required to provide a Form WB–DEC to 

the Commission. The Commission 

estimates that it would receive a Form 

WB–DEC in roughly 50 percent of the 

cases in which the Commission receives 

a Form TCR or an electronic submission 

of information.94 As noted above, the 

Commission estimates that it would 

receive approximately 30,000 combined 

electronic submissions and submission 

on Form TCR each year. Thus, the 

Commission estimates that it would 

receive approximately 15,000 Forms 

WB–DEC each year. Each respondent 

would submit only one Form WB–DEC 

and would not have a recurring 

obligation. The Commission also 

estimates that it would take a 

whistleblower, on average, 0.5 hours to 

complete Form WB–DEC. As a result, 

the Commission estimates that the 

annual PRA burden of Form WB–DEC is 

7,500 hours. 

iii. Proposed Form WB–APP 

Each whistleblower who believes that 

he is entitled to an award because he 

provided original information to the 

Commission that led to successful 

enforcement of a covered judicial or 

administrative action, or a related 

action, would be required to submit a 

Form WB–APP to be considered for an 

award. A whistleblower could only 

submit a Form WB–APP after there has 

been a ‘‘Notice of Covered Action’’ 

published on the Commission’s Web 

site pursuant to Proposed Rule 21F–10. 

The Commission estimates that it would 

post approximately 130 such Notices 

each year.95 The Commission then 

estimates that it would receive 

approximately 117 Forms WB–APP each 

year.96 The Commission also estimates 

that it would take a whistleblower, on 

average, two hours to complete Form 

WB–APP. The completion time would 

depend largely on the complexity of the 

alleged violation and the amount of 

information the whistleblower possesses 

in support of his application for an 

award. As a result, the Commission 

estimates that the annual PRA burden of 

Form WB–APP is 234 hours. 

iv. Involvement and Cost of Attorneys 

Under the Proposed Rules, a 

whistleblower who discloses his 

identity may elect, and an anonymous 

whistleblower is required, to retain 

counsel to represent the whistleblower 

in the Whistleblower Program. The 

Commission expects that in most of 

those instances the whistleblower’s 

counsel will complete, or assist in the 

completion, of some or all of the 

required forms on behalf of the 

whistleblower. The Commission also 

expects that in the vast majority of cases 

in which a whistleblower is represented 

by counsel, the whistleblower will enter 

into a contingency fee arrangement with 

counsel, providing that counsel will be 

paid for the representation through a 

fixed percentage of any recovery by the 

whistleblower under the Program. Thus, 

most whistleblowers will not incur any 

direct, quantifiable expenses for 

attorneys’ fees for the completion of the 

required forms. 

The Commission anticipates that a 

small number of whistleblowers (no 

more than five percent of all 

whistleblowers) will enter into hourly 

fee arrangements with counsel.97 In 

those cases, a whistleblower will incur 

direct expenses for attorneys’ fees for 

the completion of the required forms. To 

estimate those expenses, the 

Commission makes the following 

assumptions: 

(i) The Commission will receive 

approximately 3,000 Forms TCR, 15,000 

Forms WB–DEC, and 117 Forms WB– 

APP annually; 98

(ii) Whistleblowers will pay hourly 

fees to counsel for the submission of 

approximately 150 Forms TCR, 750 

Forms WB–DEC, and 6 Forms WB–APP 

annually; 99

(iii) Counsel retained by 

whistleblowers pursuant to an hourly 

fee arrangement will charge on average 

$400 per hour; 100 and 

(iv) Counsel will bill on average: 

(i) 2 hours to complete a Form TCR, 

(ii) .5 hours to complete a Form WB– 

DEC, and (iii) 10 hours to complete a 

Form WB–APP.101

Based on those assumptions, the 

Commission estimates that each year 

whistleblowers will incur the following 

total amounts of attorneys’ fees for 

completion of the Whistleblower 

Program forms: (i) $120,000 for the 

completion of Form TCR; (ii) $150,000 

for the completion of Form WB–DEC; 

and (iii) $24,000 for the completion of 

Form WB–APP. 

E. Mandatory Collection of Information 

A whistleblower would be required to 

complete either a Form TCR or submit 

his information electronically and to 

complete both Forms WB–DEC and 

WB–APP to qualify for a whistleblower 

award. 

F. Confidentiality 

As explained above, the statute 

provides that the Commission must 

maintain the confidentiality of the 

identity of each whistleblower, subject 

to certain exceptions. Section 21F(h)(2) 

states that, except as expressly 

provided: 

• [T]he 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 certain 

specific entities listed in paragraph (C) of 

Section 21F(h)(2)]. 


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102See S. Rep. No. 111–176 at 110 (2010) (‘‘The 

Whistleblower Program aims to motivate those with 

inside knowledge to come forward and assist the 

Government to identify and prosecute persons who 

have violated the securities laws * * *’’). 

103The incentives to whistleblowers include not 

only the monetary award, but also a desire to 

cleanse the conscience or prevent harm to others. 

See Anthony Heyes and Sandeep Kapur, An 

Economic Model of Whistleblower Policy, 25 J.L. 

ECON. & ORG. 157 at 159, 164, 171. 

104Specifically, Dodd-Frank makes it unlawful 

for any employer to ‘‘discharge, demote, suspend, 

threaten, harass, directly or indirectly, or in any 

other manner discriminate against, a whistleblower 

in the terms and conditions of employment.’’ The 

statute also provides that any individual who 

alleges retaliation under the Act may bring an 

action in the appropriate Federal district court. 

Moreover, the statute allows any individual to 

submit information anonymously through a lawyer. 

As a result, in many cases, employers will be 

unaware when their employees submit tips to the 

Commission. 

105See Alexander Dyck et al., ‘‘Who Blows the 

Whistle on Corporate Fraud?’’ working paper (2009) 

(reporting that ‘‘having access to * * * monetary 

rewards has a significant impact on the probability 

a stakeholder becomes a whistleblower.’’), available 

at http://faculty.chicagobooth.edu/luigi.zingales/ 

research/papers/whistle.pdf. 

Section 21F(h)(2) also allows the 

Commission to share information 

received from whistleblowers with 

certain domestic and foreign regulatory 

and law enforcement agencies. 

However, the statute requires the 

domestic entities to maintain such 

information as confidential, and 

requires foreign entities to maintain 

such information in accordance with 

such assurances of confidentiality as the 

Commission deems appropriate. 

In addition, Section 21F(d)(2) 

provides that a whistleblower may 

submit information to the Commission 

anonymously, so long as the 

whistleblower is represented by 

counsel. However, the statute also 

provides that a whistleblower must 

disclose his or her identity prior to 

receiving payment of an award. 

Request for Comment: Pursuant to 44 

U.S.C. 3506(c)(2)(B), we request 

comments to: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

Commission’s estimate of burden of the 

proposed collections of information; 

• Determine whether there are ways 

to enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Evaluate whether there are ways to 

minimize the burden of the collection of 

information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

The Commission requests comment 

and supporting empirical data on the 

burden and cost estimates for the 

proposed rule, including the costs that 

potential whistleblowers may incur. 

Persons wishing to submit comments 

on the collection of information 

requirements of the proposed rule 

should direct them to the Office of 

Management and Budget, Attention 

Desk Officer for the Securities and 

Exchange Commission, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503 and should send 

a copy to Elizabeth M. Murphy, 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090, with 

reference to File No. S7–33–10. 

Requests for materials submitted to 

OMB by the Commission with regard to 

these collections of information should 

be in writing, refer to File No. S7–33– 

10, and be submitted to the Securities 

and Exchange Commission, Office of 

Investor Education and Advocacy, 100 F 

Street, NE., Washington, DC 20549– 

0213. OMB is required to make a 

decision concerning the collections of 

information between 30 and 60 days 

after publication of this release. 

Consequently, a comment to OMB is 

best assured of having its full effect if 

OMB receives it within 30 days after 

publication. 

V. Cost-Benefit Analysis 

A. Introduction 

The Commission is proposing 

rulemaking to implement the provisions 

of new Section 21F of the Exchange Act, 

added by Section 922 of Dodd-Frank to 

provide additional incentives and 

protections to whistleblowers who 

provide information relating to 

violations of the securities laws. Before 

Dodd-Frank, the Commission regularly 

received tips, complaints and referrals 

concerning securities law violations. 

Tips have provided, and continue to 

provide, the Commission with valuable 

information regarding potential 

violations of the Federal securities laws, 

as well as information about new market 

trends, products or practices that may 

help the agency in support of its 

mission. 

In establishing the new whistleblower 

program in Section 21F, Congress 

sought to create and enhance incentives 

and protections for whistleblowers 

providing information leading to 

successful Commission enforcement 

actions.102 Although whistleblowers can 

be motivated by other factors,103 the 

statute creates new and substantial 

financial incentives for individuals to 

provide the Commission with 

information regarding potential 

violations of the Federal securities laws. 

The statutory requirements for an 

award—that whistleblowers are entitled 

to an award only if they voluntarily 

provide original information, and then 

only if that information leads to a 

successful enforcement action—are 

designed to encourage whistleblowers to 

provide high-quality tips and 

continuing cooperation. Moreover, the 

statutory provisions permitting 

anonymous submissions and 

prohibiting retaliation against 

whistleblowers should encourage 

submissions from employees of 

companies possibly engaged in 

misconduct.104 Overall, enhanced 

whistleblower incentives should likely 

result in more frequent reporting of 

misconduct, which will result in greater 

deterrence of securities law violations 

and more effective and efficient 

enforcement on the part of the 

Commission.105

The incentives created by the statute 

also present some significant challenges. 

First, the statute could provide financial 

incentives for attorneys and others to 

breach the attorney-client privilege in 

order to seek an award. This would 

interfere with the ability of companies 

and individuals to share information 

with an attorney while seeking legal 

advice. Second, the statute could 

provide financial incentives for 

employees to report violations to the 

Commission rather than follow their 

employers’ internal compliance 

procedures. This could undermine the 

effectiveness of internal compliance 

programs. Third, the statute could result 

in an increase in spurious allegations, 

forcing innocent companies and 

individuals to incur substantial cost to 

investigate into and defend against the 

false allegations. Finally, the statute 

could result in award payments to 

individuals who have violated the 

Federal securities laws. This could 

result in perverse incentives by 

potentially encouraging violations of the 

law. 

Although many of the requirements of 

the whistleblower award program are 

established by the statute, Congress 

required the Commission to issue rules 

and regulations necessary or appropriate 

to implement the Program. In that 

regard, the Commission has exercised 

its discretion in this rulemaking to 

propose rules that contain several key 

definitional or interpretive provisions 

that help define the scope of the 

program, and procedures that 

whistleblowers will be required to 

follow to submit information to the 


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Commission and to apply for awards 

under the Program, as described below. 

Proposed Rule 21F–4 defines three 

terms—(i) ‘‘Voluntary Submission of 

Information,’’ (ii) ‘‘Independent 

Knowledge,’’ and (iii) ‘‘Information that 

Leads to Successful Enforcement’’—that 

together play a significant role in 

determining whether a whistleblower is 

eligible for an award. Proposed Rule 

21F–4(a) defines ‘‘Voluntary Submission 

of Information’’ to state that a 

whistleblower must provide information 

to the Commission prior to receiving a 

request from the Commission or other 

relevant authority. The proposed 

definition also provides that a 

whistleblower ‘‘will be considered to 

have received a request, inquiry or 

demand if documents or information 

from [the whistleblower] are within the 

scope of a request, inquiry, or demand 

that [the whistleblower’s] employer 

receives unless, after receiving the 

documents or information from [the 

whistleblower, the] employer fails to 

provide [the whistleblower’s] 

documents or information to the 

requesting authority in a timely 

manner.’’ This proposed definition 

requires that, to be eligible for an award, 

a whistleblower or his representative 

provide his information regarding a 

potential violation before he or his 

company receives a request, inquiry or 

demand from the Commission or other 

investigatory authority. 

Proposed Rule 21F–4(b)(4) states that 

a whistleblower will not be considered 

to have provided ‘‘independent 

knowledge’’ if ‘‘[the whistleblower] 

obtained the knowledge or the 

information upon which [his] analysis is 

based: (i) Through a communication 

that was subject to the attorney-client 

privilege, unless the disclosure of that 

information is otherwise permitted by 

§ 205.3(d)(2) of this chapter, the 

applicable state attorney conduct rules, 

or otherwise; (ii) as a result of the legal 

representation of a client on whose 

behalf [the whistleblower’s] services, or 

the services of [the whistleblower’s] 

employer or firm, have been retained, 

and [the whistleblower] seek[s] to use 

the information to make a whistleblower 

submission for [his] own benefit unless 

disclosure is authorized by § 205.3(d)(2) 

of this chapter, the applicable state 

attorney conduct rules, or otherwise; 

(iii) through the performance of an 

engagement required under the 

securities laws by an independent 

public accountant, if that information 

relates to a violation by the engagement 

client or the client’s directors, officers or 

other employees; (iv) because [the 

whistleblower was] a person with legal, 

compliance, audit, supervisory, or 

governance responsibilities for an 

entity, and the information was 

communicated to [the whistleblower] 

with the reasonable expectation that 

[he] would take steps to cause the entity 

to respond appropriately to the 

violation, unless the entity did not 

disclose the information to the 

Commission within a reasonable time or 

proceeded in bad faith; or (v) otherwise 

from or through an entity’s legal, 

compliance, audit or other similar 

functions or processes for identifying, 

reporting and addressing potential noncompliance with law, unless the entity 

did not disclose the information to the 

Commission within a reasonable time or 

proceeded in bad faith; (vi) [b]y a means 

or in a manner that violates applicable 

Federal or State criminal law.’’ 

Proposed Rule 21F–4(c) defines 

‘‘Information that Leads to Successful 

Enforcement’’ such that a whistleblower 

is only entitled to an award if (i) the 

whistleblower provides information that 

causes the staff ‘‘to commence an 

examination, open an investigation, 

reopen an investigation that the 

Commission had closed, or to inquire 

concerning new or different conduct as 

part of a current examination or 

investigation’’ and the information 

‘‘significantly contributed to the success 

of the action’’ or (ii) the whistleblower 

provides information regarding 

‘‘conduct that was already under 

examination or investigation’’ and the 

information ‘‘would not otherwise have 

been obtained and was essential to the 

success of the action.’’ 

Proposed Rule 21F–6 sets forth the 

criteria for determining the amount of 

the award to be made to a 

whistleblower. Three of the stated 

criteria are derived from the statute, but 

the proposed rule also includes a fourth 

factor: whether the award otherwise 

enhances the Commission’s ability to 

enforce the Federal securities laws, 

protect investors, and encourage the 

submission of high quality information 

from whistleblowers. 

Proposed Rule 21F–8 states additional 

criteria for eligibility for an award. A 

number of these are derived from the 

statute, but the proposed rule also 

provides that a whistleblower may be 

required to provide various types of 

cooperation to the staff or enter a 

confidentiality agreement. In addition to 

certain statutory exclusions from 

eligibility, the proposed rule also 

excludes any person who is, or was at 

the time of acquiring information, a 

member, officer, or employee of a 

foreign government or certain other 

foreign entities. 

Proposed rules 21F–9, 10, and 11 set 

forth the procedures for submitting 

original information and making a claim 

for an award. First, pursuant to 

Proposed Rule 21F–9(a), a 

whistleblower must complete either 

Form TCR or submit information 

electronically through the Electronic 

Data Collection System. Second, 

pursuant to Proposed Rule 21F–9(b), a 

whistleblower must complete and 

submit Form WB–DEC, sworn under 

penalty of perjury. A whistleblower 

wishing to submit a hard-copy Form 

TCR would be required to submit Form 

WB–DEC at the same time as he or she 

submits a Form TCR. A whistleblower 

wishing to submit information 

electronically could submit Form WB– 

DEC electronically or in hard copy 

within 30 days of the Commission’s 

receipt of the whistleblower’s electronic 

submission of information. 

The proposed rules also require 

potential whistleblowers to complete a 

third form in the claims phase to 

establish potential eligibility for an 

award under the Program. Pursuant to 

Proposed Rules 21F–10 and 21F–11, a 

whistleblower must complete Form 

WB–APP to apply for an award for a 

covered judicial or administrative action 

by the Commission or a related action. 

Proposed Rule 21F–15 would provide, 

that ‘‘[i]n determining whether the 

required $1,000,000 threshold has been 

satisfied * * * for purposes of making 

any award [to a whistleblower], the 

Commission will not take into account 

any monetary sanctions that the 

whistleblower is ordered to pay.’’ 

Likewise, Proposed Rule 21F–15 would 

provide that the Commission will not 

take into account any monetary 

sanctions ‘‘that are ordered against any 

entity whose liability is based 

substantially on conduct that the 

whistleblower directed, planned, or 

initiated.’’ Proposed Rule 21F–15 further 

would provide that ‘‘if the Commission 

determines that a whistleblower is 

eligible for an award, any amounts that 

the whistleblower or such an entity pay 

in sanctions as a result of the action or 

related actions will not be included 

within the calculation of the amounts 

collected for purposes of making 

payments [to the whistleblower].’’ 

Proposed Rule 21F–16(b) states that if 

a whistleblower who is a director, 

officer, member, agent, or employee of 

an entity that has counsel has initiated 

communications with the Commission 

relating to a potential securities law 

violation, the staff is authorized to 

communicate directly with the 

whistleblower regarding the subject of 

the communication without seeking the 

consent of the entity’s counsel. 

We are sensitive to the costs and 

benefits of our rules. As discussed 


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106As also noted above, the proposed definitions 

are consistent with the legislative intent behind the 

Act. See S. Rep. No. 111–176 at 110 (2010) (‘‘The 

Whistleblower Program aims to motivate those with 

inside knowledge to come forward and assist the 

Government to identify and prosecute persons who 

have violated the securities laws * * *’’). 

107See Rewarding Whistleblowers: The Costs and 

Benefits of an Incentive-Based Compliance Strategy, 

Robert Howse and Ronald J. Daniels, University of 

Pennsylvania Departmental Papers (School of Law), 

1995, page 527. 

above, many of the key elements of the 

whistleblower program have been 

established by the statute, and our 

proposed rules implementing the statute 

in some respects largely track statutory 

provisions. The cost-benefit analysis 

that follows focuses on the benefits and 

costs related to those rules on which we 

exercised discretion, and not on the 

overall benefits and costs of the 

statutory regime for whistleblower 

incentives and protections. 

B. Benefits 

We have sought to structure the 

definitions in Proposed Rule 21F–4 so 

as to encourage whistleblowers to 

provide the Commission with highquality information—tips indicating a 

high likelihood of a substantial 

securities violation—that we might not 

otherwise have received in a timely 

manner. 

We have also sought to strike the right 

balance in defining terms so as not to be 

overly restrictive or overly broad. 

Overly restrictive definitions could 

render the program ineffective as only a 

small fraction of potential tippers and 

complainants would qualify for 

monetary rewards. By contrast, overly 

broad definitions could result in 

inefficient use of the Investor Protection 

Fund—especially in cases in which the 

Commission already possesses 

information sufficient to bring a 

successful enforcement action. From an 

economic perspective of enforcement, 

the primary value of the Whistleblower 

Program is reduced economic cost of 

collecting necessary information early 

on and before the Commission can 

obtain the information on its own. The 

primary economic cost of the Program 

includes the out-of-pocket costs as well 

as opportunity costs, which include 

losses due to fraud and costs of 

enforcement. Consequently, the 

proposed definitions together should 

provide benefits in that they create 

strong incentives, in the form of 

eligibility for a monetary award, for 

whistleblowers to provide information 

to the Commission or other authorities 

and to provide the information early, 

rather than waiting to receive a request 

or inquiry from a relevant authority.106

This may be a particular result of the 

definition of ‘‘voluntary submission of 

information’’ in Proposed Rule 21F–4; 

that rule would deny eligibility for an 

award to a whistleblower who has 

valuable information regarding potential 

violations of the Federal securities laws 

if he has received a subpoena or other 

request relating to the alleged violations 

in question—even if the subpoena or 

request does not call for the production 

of the valuable information. 

The definition of ‘‘information that 

leads to successful enforcement’’ in 

Proposed Rule 21F–4(c) may also have 

the benefit of encouraging submission of 

high-quality information that is 

particularly useful to successful 

enforcement actions. By requiring that 

the whistleblower provide information 

that either ‘‘significantly contributed’’ to 

the success of an action (if the 

whistleblower has provided information 

that has led the Commission to begin 

investigating that matter), or that ‘‘would 

not otherwise have been obtained and 

was essential to the success of the 

action’’ (if the information related to a 

matter already under examination or 

investigation), this proposed definition 

should help to screen out less 

significant tips from eligibility for 

awards, and as a result, lead to a more 

efficient use of Commission resources 

and the Investor Protection Fund. 

Further, by requiring this level of 

connection to the success of an action, 

the proposed rule may have the benefit 

of encouraging whistleblowers to 

provide more and better information. 

Similarly, the criterion contained in 

Proposed Rule 21F–6(d), which allows 

the Commission to consider its ability to 

enforce the securities laws, protect 

investors and encourage high quality 

information as a criterion in 

determining the amount of an award to 

be paid, may have the benefit of 

encouraging better quality information, 

thus furthering effective enforcement 

and investor protection. 

As noted, the Commission recognizes 

that whistleblower awards, as provided 

for by the statute, could potentially 

create incentives for employees of 

companies to submit information 

regarding potential violations to the 

Commission rather than to compliance 

personnel or through compliance 

procedures.107 This in turn could 

undermine the effectiveness of internal 

company compliance processes. We 

have sought to address and mitigate that 

concern, in part, through the proposed 

definition of ‘‘Independent Knowledge’’ 

in Proposed Rule 21F–4(b)(2). While the 

restrictions in this definition would 

limit the pool of eligible whistleblowers 

and thereby reduce the number of 

potentially useful informants, the 

definition could have the benefit of 

limiting potential interference with the 

integrity of corporate compliance 

programs of companies, which could 

reduce the overall efficiency of day-today compliance operations. 

As with the proposed definition of 

‘‘Independent Knowledge’’ addressed 

above, the Commission believes that the 

procedures relating to the timing of the 

submission of ‘‘original information’’ 

could mitigate costs that the 

Whistleblower Program might impose 

on companies and their compliance 

programs and procedures. Importantly, 

the proposed procedures will allow a 

potential whistleblower to provide 

information to legal or compliance 

personnel within his or her company, 

and wait for up to 90 days, without 

compromising his or her eligibility for 

an award under the Program. This 

would also allow a company a 

reasonable period of time to investigate 

and respond to potential securities laws 

violations (or at least begin an 

investigation) prior to reporting them to 

the Commission or an appropriate 

regulator. Therefore, this approach is 

consistent with the Commission’s efforts 

to encourage companies to create and 

implement strong corporate compliance 

programs. 

One economic benefit of providing 

this grace period is that the individual 

could be mistaken about securities laws, 

and the compliance personnel would 

likely be better informed about whether 

certain conduct constitutes a violation 

of securities laws. Without this grace 

period, individuals, regardless of 

whether their judgments regarding 

certain violations were correct, could be 

motivated to report a suspicious finding 

as soon as possible. The overall effect 

could be an overflow of noisy signals— 

that is, a large number of tips of varying 

quality—causing the Commission to 

incur costs to process and validate the 

information. Allowing for this proposed 

grace period, we believe, provides a 

mechanism by which some of those 

erroneous cases may be eliminated 

before reaching the Commission, 

without otherwise adversely affecting 

the incentives on the part of potential 

whistleblowers. 

The Commission also recognizes that 

whistleblower awards could create 

incentives for attorneys or others to 

breach the attorney-client privilege by 

submitting tips disclosing privileged 

communications. The Commission has 

attempted to address this concern 

through the proposed definition of 

‘‘Independent Knowledge,’’ which 

excludes information obtained through 

communications protected by the 


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108 Dyck et al. (2009). The staff reviews and 

evaluates all TCRs, regardless of whether they are 

accompanied by a whistleblower declaration. 

However, because the declaration would aid in 

assessing reliability, the staff may consider whether 

a whistleblower has submitted a declaration in 

prioritizing the investigation of TCRs and the 

allocation of the Division of Enforcement’s limited 

resources. 

attorney-client privilege. Thus, a 

whistleblower who submits such 

information would not have provided 

the Commission with ‘‘Original 

Information’’ and thus would not be 

eligible for an award. The benefit of this 

proposed definition is that it helps 

preserve and protect the integrity of the 

attorney-client privilege and removes 

financial incentive encouraging 

individuals to breach the privilege. 

Proposed Rule 21F–8 may have the 

benefit of encouraging cooperation by 

whistleblowers, which should help the 

effectiveness and efficiency of 

Commission enforcement. Similarly, we 

believe that Proposed Rule 21F–15, on 

balance, will have the same result. We 

recognize that there is a cost associated 

with providing monetary awards to 

individuals who have engaged in 

securities violations. Yet, these 

individuals frequently have the most 

significant and relevant information that 

will aid in detecting and prosecuting 

sophisticated securities fraud schemes. 

By excluding from the award 

calculation any monetary sanctions that 

the whistleblower is ordered to pay or 

that are ordered against the entity whose 

liability is substantially derived from 

the whistleblower’s conduct, the 

proposed rules limit the awards to 

highly culpable whistleblowers more 

than the awards to less culpable 

whistleblowers. 

Likewise, Proposed Rule 21F–16(b), 

by authorizing communications 

between the Commission staff and a 

whistleblower without seeking consent 

of the counsel of an entity with whom 

the whistleblower is employed, is 

intended to have the benefit of 

encouraging whistleblowers to 

communicate with the Commission 

without the fear that their 

communications will lead to disclosure 

of their identity to their employer. 

The procedures contained in the 

Proposed Rules should result in certain 

benefits. The Commission’s objective in 

proposing these rules is to devise an 

efficient mechanism to implement the 

statutory whistleblower program that 

will allow the Commission to receive 

high-quality information regarding 

securities law violation in a timely, 

organized, useful manner. As an initial 

matter, the proposed procedures 

regarding the submission of information 

and the required Forms are designed to 

elicit from whistleblowers critical 

information regarding the potential 

violations at issue. The proposed Forms 

that would be required to provide clear 

and uniform guidance to whistleblowers 

regarding the information that the 

Commission deems necessary to 

investigate the potential violations and 

to determine eligibility for awards under 

the program. 

In addition, the proposed requirement 

that whistleblowers must complete 

Form WB–DEC, under penalty of 

perjury, will encourage whistleblowers 

who wish to participate in the 

Whistleblower Program to submit 

truthful information and discourage 

them from submitting false information. 

As such, this procedure will allow the 

Commission to place greater reliance on 

the accuracy of information it receives 

from whistleblowers, which should 

allow the Commission to prioritize the 

review and investigation of that 

information more effectively and 

efficiently. The requirement should also 

mitigate the potential harm to 

companies and individuals that may be 

caused by false or spurious allegations 

of wrongdoing. In addition, the 

requirement that Form WB–DEC be 

submitted within 30 days of submission 

of the Form TCR is designed to provide 

staff with the opportunity to better 

evaluate the TCR in light of the fact that 

it is joined by a sworn statement 

regarding its accuracy. Accordingly, the 

Proposed Rules should result in a 

decrease in the amount of Commission 

resources devoted to false or 

unsubstantiated leads.108

Moreover, proposed Form WB–APP 

requires the submission of information 

that is necessary for the Commission to 

determine award eligibility. While 

requiring an additional form imposes a 

cost on potential whistleblowers, 

determining the appropriate level of 

award for each instance of qualified 

whistleblower is critical to successful 

implementation of the whistleblower 

rule. The Commission needs to collect 

pertinent information from the 

whistleblower to determine the strength 

of his case. This information will need 

to be evaluated in conjunction with the 

Commission’s enforcement action to 

determine the significance of the 

whistleblower’s contribution. 

In addition, the Commission has 

included procedural elements in the 

proposed rules to provide a fair process 

for consideration of whistleblower 

award claims, and, given the possibility 

of judicial review, to provide a clearly 

defined record on appeal. These 

procedures should also encourage 

greater participation in the program. 

While a monetary reward is typically 

not the sole motivation for potential 

whistleblowers, having a robust clearly 

described process for determining grants 

of monetary rewards should help 

incentivize those individuals who seek 

to benefit economically from providing 

information to the Commission. 

C. Costs 

The Proposed Rules may impose 

certain costs on prospective 

whistleblowers. As an initial matter, the 

procedures would require potential 

whistleblowers to complete certain 

forms to establish eligibility for an 

award under the Program. As noted 

above, the Commission recognizes that 

it will take time and effort on the part 

of whistleblowers to complete and 

submit the proposed forms. In addition, 

any whistleblower wishing to submit 

one of the required forms in hard copy 

would need to arrange for delivery and 

pay the postage or other delivery costs. 

It is also possible that the proposed 

procedures could discourage some 

whistleblowers with valuable 

information from submitting their 

information to the Commission. Some 

prospective whistleblowers could find 

the procedures burdensome or 

confusing, and as a result, they might 

elect not to provide information to the 

Commission. In these Proposed Rules, 

the Commission has attempted to 

mitigate the potential for burden or 

confusion in the procedures, but such 

costs cannot be eliminated. 

The 30-day time limit proposed for 

submitting a Form WB–DEC also 

imposes costs on whistleblowers in that 

it would require them to act within a 

certain period of time if they wish to be 

eligible for an award under the Program. 

The Commission has proposed the 30- 

day time limit based on a balance of 

those costs against the need to have the 

WB–DEC submitted close enough in 

time with the submission through the 

Electronic Data Collection System so 

that: (i) The Commission can track and 

tie together each submission through the 

electronic system with the related Form 

WB–DEC and (ii) the Commission will 

receive notice that a submission through 

the electronic system is a submission 

under the whistleblower program. 

The proposed 90-day limit on 

submission of Form WB–DEC also 

would impose costs on whistleblowers 

in that it requires them to act within a 

certain period of time if they wish 

certain benefits under the Program. The 

Commission has proposed the 90-day 

time limit based on a balance of those 

costs against the concern that 

companies investigating allegations of 

potential securities law violations will 


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109 15 U.S.C. 78w(a)(2). 

110 15 U.S.C. 78c(f). 

view the time limit as the time they may 

wait before reporting violations to the 

Commission. To be clear, the 

Commission does not intend any time 

period in these Proposed Rules to 

inform companies on time limits for 

reporting violations to the Commission. 

In addition, the definitional and scope 

provisions described above may also 

result in costs if they discourage 

potential whistleblowers from coming 

forward. As discussed above, the 

proposed definitions of ‘‘voluntary 

submission of information,’’ 

‘‘independent knowledge,’’ and 

‘‘information that leads to successful 

enforcement’’ together would result in 

heightening the standards for eligibility 

for an award. It is possible that 

restrictions from eligibility could in 

some cases discourage some 

whistleblowers from submitting 

potentially useful information. 

In particular, the proposed definition 

of ‘‘voluntary submission of 

information’’ excludes from eligibility 

any whistleblower who has a legal 

obligation to provide the information 

regarding potential violations to the 

Commission. This element of the 

definition could result in instances in 

which the Commission does not receive 

important information regarding 

potential violations from a potential 

whistleblower—that is, situations where 

a potential whistleblower has a legal 

obligation to provide the information 

and does not, but he would have if 

eligible for an award. 

Similarly, other types of ineligibility 

created by our proposed rules—for 

example, the provisions in Proposed 

Rule 21F–8 that exclude from eligibility 

certain foreign officials or individuals 

who obtain information from other 

categories of ineligible persons—may 

also cause those persons not to come 

forward with information in their 

possession about securities law 

violations. Although we have attempted 

to craft these rules to strike a balance 

that is consistent with the purposes of 

the statute, these provisions may result 

in some foregone opportunities for 

effective enforcement action. 

Request for Comments: We request 

comments and empirical data on all 

aspects of this cost-benefit analysis, 

including identification and 

quantification of any additional costs or 

benefits of, or suggested alternatives to, 

the proposed rule. 

VI. Consideration of Burden on 

Competition and Promotion of 

Competition and Capital Formation 

Section 23(a)(2) 109 of the Securities 

Exchange Act of 1934 requires the 

Commission, in promulgating rules 

under the Exchange Act, to consider the 

impact that any rule may have on 

competition and prohibits the 

Commission from adopting any rule that 

would impose a burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act. Further, Section 3(f) of 

the Exchange Act 110 requires the 

Commission, when engaging in 

rulemaking where it is required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to consider, in addition to the 

protection of investors, whether the 

action will promote efficiency, 

competition, and capital formation. 

As with the cost-benefit analysis, we 

focus our consideration of burden on 

competition and promotion of 

competition and capital formation to the 

areas of these Proposed Rules over 

which the Commission has exercised 

discretion and do not consider the 

elements of the Whistleblower Program 

established by Congress. 

In considering the impact on capital 

formation of our proposed rules, we 

consider the extent to which they affect 

allocation of capital and secondarily 

how they affect investors’ choices of 

investments and portfolio allocations. 

For issuers, this includes considering 

the extent to which the rules foster an 

information environment and market 

structures that lead to securities prices 

based upon efficient allocation of 

capital. From this perspective, one of 

the issues that may affect capital 

formation in the economy is investor 

confidence in the sense of investors 

trusting in the fairness of financial 

markets, of which their perception of 

the effectiveness and 

comprehensiveness of the regulatory 

regime is an important part. If investors 

fear theft, fraud, manipulation, insider 

trading, or conflicted investment advice, 

their trust in the markets will be low, 

both in the primary market for issuance 

or in the secondary market for trading. 

This would increase the cost of raising 

capital, which would impair capital 

formation—in the sense that it will be 

less than it would or should be if rules 

against such abuses were in effect and 

properly enforced and obeyed. 

For reasons stated in the cost-benefit 

analysis, we believe the Proposed Rules 

would result in an efficient and effective 

implementation of the statutory 

whistleblower program. As such, we 

believe the Proposed Rules would serve 

to reduce potential securities law 

violations. As a result, investor reliance 

on the veracity of issuer filings with the 

Commission may increase 

incrementally, which would contribute 

to lowering the cost of raising capital 

generally. Those provisions in the 

Proposed Rules that are designed to 

promote and protect the use of corporate 

compliance programs would further the 

requirements of the Sarbanes-Oxley Act 

of 2002 and other statutory provisions 

that encourage or mandate such 

programs. Thus, we believe that we 

have structured the Proposed Rules so 

as to improve investor confidence in the 

market and therefore expect that the 

impact of the Proposed Rules on the 

efficiency of capital formation will be 

positive. 

The Commission does not believe the 

elements of the proposed rules over 

which the Commission exercised 

discretion would impose any undue 

burdens on competition. The relevant 

market for competition analysis here is 

the market for securities issuers 

competing to raise capital from 

investors. Because the proposed rules 

are expected to further deterrence of 

financial fraud, there may be a general 

improvement in the fairness of 

competition for capital from investors— 

and consequently improvement in the 

ability of companies that abide by the 

law to compete with companies that do 

not. To the extent that the Proposed 

Rules impose costs on companies, many 

of these follow from the statutory 

mandate to implement the 

Whistleblower Program generally and 

are imposed on all companies. The 

Commission believes any costs 

associated with compliance with the 

proposed rules, as structured, would be 

limited and, therefore, would not 

impose undue burden on competition. 

Furthermore, the Proposed Rules are 

structured to encourage the submission 

of high quality information regarding 

securities law violations in a manner 

that is effective and efficient. As a result 

of expected improvement in 

competition and expected increase in 

capital formation, we believe the 

Proposed Rules should generally 

increase the efficiency of the economy. 

In addition, the proposed rules should 

increase the efficiency by which the 

Commission’s Enforcement program 

obtains information about potential 

securities law violations. 

We request comment (including 

empirical data and other factual 

support) on whether the Proposed 


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111Pub. L. 104–121, tit.II, 110 Stat. 857 (1996). 

112 5 U.S.C. 603(a). 

113 5 U.S.C. 605(b). 

Rules, if adopted, would affect 

efficiency, competition, and capital 

formation. 

VII. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (SBREFA),111 the Commission 

solicits data to determine whether the 

proposed rule constitutes a ‘‘major’’ rule. 

Under SBREFA, a rule is considered 

‘‘major’’ where, if adopted, it results or 

is likely to result in: 

• An annual effect on the economy of 

$100 million or more (either in the form 

of an increase or a decrease); 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

Commentators should provide 

empirical data on (a) the potential 

annual effect on the economy; (b) any 

increase in costs or prices for consumers 

or individual industries; and (c) any 

potential effect on competition, 

investment or innovation. 

VIII. Regulatory Flexibility Act 

Certification 

Section 603(a) of the Regulatory 

Flexibility Act 112 requires the 

Commission to undertake an initial 

regulatory flexibility analysis of the 

proposed rule on small entities unless 

the Commission certifies that the rule, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.113

Small entity is defined in 5 U.S.C. 

601(6) to mean ‘‘small business,’’ ‘‘small 

organization,’’ and ‘‘small governmental 

jurisdiction’’ as defined in 5 U.S.C. 

601(3)—(5). The definition of ‘‘small 

entity’’ does not include individuals. 

The Proposed Rules apply only to an 

individual, or individuals acting jointly, 

who provide information to the 

Commission relating to the violation of 

the securities laws. Companies and 

other entities are not eligible to 

participate in the Program as 

whistleblowers. Consequently, the 

persons that would be subject to the 

proposed rule are not ‘‘small entities’’ for 

purposes of the Regulatory Flexibility 

Act. 

For the reasons stated above, the 

Commission certifies, pursuant to 5 

U.S.C. 605(b), that the proposed rules 

and forms to implement the 

whistleblower provisions of Section 21F 

of the Exchange Act would not have a 

significant economic impact on a 

substantial number of small entities. 

IX. Statutory Authority 

The Commission proposes the new 

rules and forms contained in this 

document under the authority set forth 

in Sections 3(b), 21F and 23(a) of the 

Exchange Act. 

List of Subjects in 17 CFR Parts 240 and 

249 

Securities. 

Text of the Proposed Rules 

In accordance with the foregoing, 

Title 17, Chapter II of the Code of 

Federal Regulations, is proposed to be 

amended as follows. 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1. The authority citation for part 240 

is amended by adding the following 

citation in numerical order to read as 

follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78–i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78o– 

4, 78p, 78q, 78s, 78u–5, 78w, 78x, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, and 7201 et seq.; 18 U.S.C. 

1350; and 12 U.S.C. 5221(e)(3), unless 

otherwise noted. 

* * * * * 

Section 240.21F is also issued under 

Pub. L. 111–203, § 922(a), 124 Stat. 1841 

(2010). 

* * * * * 

2. Add §§ 240.21F–1 through 

240.21F–16 to read as follows: 

Sec. 

* * * * * 

240.21F 1–General. 

240.21F 2–Definition of a Whistleblower. 

240.21F 3–Payment of awards. 

240.21F 4–Other Definitions. 

240.21F 5–Amount of award. 

240.21F 6–Criteria for determining amount 

of award. 

240.21F 7–Confidentiality of submissions. 

240.21F 8–Eligibility. 

240.21F 9–Procedures for submitting 

original information. 

240.21F 10–Procedures for making a claim 

for a whistleblower award in SEC actions 

that result in monetary sanctions in 

excess of $1,000,000. 

240.21F 11–Procedures for determining 

awards based upon a related action. 

240.21F 12–Appeals. 

240.21F 13–Procedures applicable to the 

payment of awards. 

240.21F 14–No amnesty. 

240.21F 15–Awards to whistleblowers who 

engage in culpable conduct. 

240.21F 16–Staff communications with 

whistleblowers. 

* * * * * 

§ 240.21F–1 General. 

Section 21F of the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

(15 U.S.C. 78u-6), entitled ‘‘Securities 

Whistleblower Incentives and 

Protection,’’ requires the Securities and 

Exchange Commission (‘‘Commission’’) 

to pay awards, subject to certain 

limitations and conditions, to 

whistleblowers who provide the 

Commission with original information 

about violations of the Federal securities 

laws. These rules describe the 

whistleblower program that the 

Commission has established to 

implement the provisions of Section 

21F, and explain the procedures you 

will need to follow in order to be 

eligible for an award. You should read 

these procedures carefully because the 

failure to take certain required steps 

within the time frames described in 

these rules may disqualify you from 

receiving an award for which you 

otherwise may be eligible. Unless 

expressly provided for in these rules, no 

person is authorized to make any offer 

or promise, or otherwise to bind the 

Commission with respect to the 

payment of any award or the amount 

thereof. The Securities and Exchange 

Commission’s Whistleblower Office 

administers our whistleblower program. 

Questions about the program or these 

rules should be directed to the SEC 

Whistleblower Office, 100 F Street, NE., 

Washington, DC 20549. 

§ 240.21F–2 Definition of a Whistleblower. 

(a) You are a whistleblower if, alone 

or jointly with others, you provide the 

Commission with information relating 

to a potential violation of the securities 

laws. A whistleblower must be an 

individual. A company or another entity 

is not eligible to be a whistleblower. 

(b) The retaliation protections 

afforded to whistleblowers by the 

provisions of paragraph (h)(1) of Section 

21F of the Exchange Act (15 U.S.C. 78u– 

6(h)(1)) apply irrespective of whether a 

whistleblower satisfies the procedures 

and conditions to qualify for an award. 

Moreover, for purposes of the antiretaliation provision of paragraph 

(h)(1)(A)(i) of Section 21F, 15 U.S.C. 

78u–6(h)(1)(A)(i), the requirement that a 

whistleblower provide ‘‘information to 

the Commission in accordance’’ with 

Section 21F (15 U.S.C. 78u–6) is 

satisfied if an individual provides 

information to the Commission that 

relates to a potential violation of the 

securities laws. 

(c) To be eligible for an award, 

however, a whistleblower must submit 

original information to the Commission 

in accordance with the procedures and 

conditions described in §§ 240.21F–4, 


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240.21F–8, and 240.21F–9 of this 

chapter. 

§ 240.21F–3 Payment of awards. 

(a) Subject to the eligibility 

requirements described in §§ 240.21F–2 

and 240.21F–8 of this chapter, and to 

§ 240.21F–14 of this chapter, the 

Commission will pay an award or 

awards to one or more whistleblowers 

who: 

(1) Voluntarily provide the 

Commission 

(2) With original information 

(3) That leads to the successful 

enforcement by the Commission of a 

Federal court or administrative action 

(4) In which the Commission obtains 

monetary sanctions totaling more than 

$1,000,000. 

Note to paragraph (a): The terms 

voluntarily, original information, leads to 

successful enforcement, action, and 

monetary sanctions are defined in § 240.21F– 

4 of this chapter. 

(b) The Commission will also pay an 

award based on amounts collected in 

certain ‘‘related actions.’’ A related 

action is a judicial or administrative 

action that is brought by: 

(1) The Attorney General of the 

United States; 

(2) An appropriate regulatory agency; 

(3) A self-regulatory organization; or 

(4) A state attorney general in a 

criminal case, and is based on the same 

original information that the 

whistleblower voluntarily provided to 

the Commission, and that led the 

Commission to obtain monetary 

sanctions totaling more than $1,000,000. 

The terms appropriate regulatory 

agency and self-regulatory organization 

are defined in § 240.21F–4 of this 

chapter. 

(c) In order for the Commission to 

make an award in connection with a 

related action, the Commission must 

determine that the same original 

information that the whistleblower gave 

to the Commission also led to the 

successful enforcement of the related 

action under the same criteria described 

in these rules for awards made in 

connection with Commission actions. 

The Commission may seek assistance 

and confirmation from the authority 

bringing the related action in making 

this determination. If the Commission 

determines that the criteria for an award 

are not satisfied, or if the Commission 

is unable to obtain sufficient and 

reliable information about the related 

action to make a conclusive 

determination, the Commission will 

deny an award in connection with the 

related action. Additional procedures 

apply to the payment of awards in 

related actions. These are described in 

§ 240.21F–11 and § 240.21F–13. 

(d) The Commission will not make an 

award to you for a related action if you 

have already been granted an award by 

the Commodity Futures Trading 

Commission (‘‘CFTC’’) for that same 

action pursuant to its whistleblower 

award program under section 23 of the 

Commodity Exchange Act, 7 U.S.C. 26. 

Similarly, if the CFTC has previously 

denied an award to you in a related 

action, you will be collaterally estopped 

from relitigating any issues before the 

Commission that were necessary to the 

CFTC’s denial. 

§ 240.21F–4 Other Definitions. 

(a) Voluntary submission of 

information. (1) Your submission of 

information is made voluntarily within 

the meaning of § 240.21F of this chapter 

if you provide the Commission with the 

information before you or anyone 

representing you (such as an attorney) 

receives any request, inquiry, or 

demand from the Commission, the 

Congress, any other Federal, State, or 

local authority, any self-regulatory 

organization, or the Public Company 

Accounting Oversight Board about a 

matter to which the information in your 

submission is relevant. If the 

Commission or any of these other 

authorities make a request, inquiry, or 

demand to you or your representative 

first, your submission will not be 

considered voluntary, and you will not 

be eligible for an award, even if your 

response is not compelled by subpoena 

or other applicable law. 

(2) For purposes of this paragraph, 

you will be considered to have received 

a request, inquiry or demand if 

documents or information from you are 

within the scope of a request, inquiry, 

or demand that your employer receives 

unless, after receiving the documents or 

information from you, your employer 

fails to provide your documents or 

information to the requesting authority 

in a timely manner. 

(3) In addition, your submission will 

not be considered voluntary if you are 

under a pre-existing legal or contractual 

duty to report the securities violations 

that are the subject of your original 

information to the Commission or to any 

of the other authorities described in 

paragraph (1) of this section. 

(b) Original information. (1) In order 

for your whistleblower submission to be 

considered original information, it must 

be: 

(i) Derived from your independent 

knowledge or independent analysis; 

(ii) Not already known to the 

Commission from any other source, 

unless you are the original source of the 

information; 

(iii) 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 you are a source of the 

information; and 

(iv) Provided to the Commission for 

the first time after July 21, 2010 (the 

date of enactment of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act). 

(2) Independent knowledge means 

factual information in your possession 

that is not derived from publicly 

available sources. You may gain 

independent knowledge from your 

experiences, communications and 

observations in your business or social 

interactions. 

(3) Independent analysis means your 

own analysis, whether done alone or in 

combination with others. Analysis 

means your examination and evaluation 

of information that may be generally 

available, but which reveals information 

that is not generally known or available 

to the public. 

(4) The Commission will not consider 

information to be derived from your 

independent knowledge or independent 

analysis if you obtained the knowledge 

or the information upon which your 

analysis is based: 

(i) Through a communication that was 

subject to the attorney-client privilege, 

unless disclosure of that information is 

otherwise permitted by § 205.3(d)(2) of 

this chapter, the applicable state 

attorney conduct rules, or otherwise; 

(ii) As a result of the legal 

representation of a client on whose 

behalf your services, or the services of 

your employer or firm, have been 

retained, and you seek to use the 

information to make a whistleblower 

submission for your own benefit, unless 

disclosure is authorized by § 205.3(d)(2) 

of this chapter, the applicable state 

attorney conduct rules, or otherwise; 

(iii) Through the performance of an 

engagement required under the 

securities laws by an independent 

public accountant, if that information 

relates to a violation by the engagement 

client or the client’s directors, officers or 

other employees; 

(iv) Because you were a person with 

legal, compliance, audit, supervisory, or 

governance responsibilities for an 

entity, and the information was 

communicated to you with the 

reasonable expectation that you would 

take steps to cause the entity to respond 

appropriately to the violation, unless 

the entity did not disclose the 

information to the Commission within a 


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reasonable time or proceeded in bad 

faith; or 

(v) Otherwise from or through an 

entity’s legal, compliance, audit or other 

similar functions or processes for 

identifying, reporting and addressing 

potential non-compliance with law, 

unless the entity did not disclose the 

information to the Commission within a 

reasonable time or proceeded in bad 

faith; 

(vi) By a means or in a manner that 

violates applicable Federal or State 

criminal law; or 

(vii) From any of the individuals 

described in paragraphs (b)(4)(i)–(vi) of 

this section. 

(5) The Commission will consider you 

to be an original source of the same 

information that we obtain from another 

source if the information satisfies the 

definition of original information and 

the other source obtained the 

information from you or your 

representative. In order to be considered 

an original source of information that 

the Commission receives from Congress, 

any other Federal, State, or local 

authority, any self-regulatory 

organization, or the Public Company 

Accounting Oversight Board, you must 

have voluntarily given such authorities 

the information within the meaning of 

these rules. You must establish your 

status as the original source of 

information to the Commission’s 

satisfaction. In determining whether you 

are the original source of information, 

the Commission may seek assistance 

and confirmation, from one of the other 

authorities described above, or from 

another entity (including your 

employer), in the event that you claim 

to be the original source of information 

that an authority or another entity 

provided to the Commission. 

(6) If the Commission already knows 

some information about a matter from 

other sources at the time you make your 

submission, and you are not an original 

source of that information under 

paragraph (b)(5) of this section, the 

Commission will consider you an 

original source of any information you 

provide that is derived from your 

independent knowledge or analysis and 

that materially adds to the information 

that the Commission already possesses. 

(7) If you provide information to 

Congress, any other Federal, State, or 

local authority, any self-regulatory 

organization, the Public Company 

Accounting Oversight Board, or to any 

of the persons described in paragraphs 

(b)(4)(iv) and (v) of this section, and 

you, within 90 days, submit the same 

information to the Commission 

pursuant to § 240.21F–9 of this chapter, 

as you must do in order for you to be 

eligible to be considered for an award, 

then, for purposes of evaluating your 

claim to an award under §§ 240.21F–10 

and 240.21F–11 of this chapter, the 

Commission will consider that you 

provided information as of the date of 

your original disclosure, report or 

submission to one of these other 

authorities or persons. You must 

establish the effective date of any prior 

disclosure, report, or submission, to the 

Commission’s satisfaction. The 

Commission may seek assistance and 

confirmation from the other authority or 

person in making this determination. 

(c) Information that leads to 

successful enforcement. The 

Commission will consider that you 

provided original information that led to 

the successful enforcement of a judicial 

or administrative action in the following 

circumstances: 

(1) If you gave the Commission 

original information that caused the 

staff to commence an examination, open 

an investigation, reopen an investigation 

that the Commission had closed, or to 

inquire concerning new or different 

conduct as part of a current examination 

or investigation, and your information 

significantly contributed to the success 

of the action; or 

(2) If you gave the Commission 

original information about conduct that 

was already under examination or 

investigation by the Commission, 

Congress, any other Federal, State, or 

local authority, any self-regulatory 

organization, or the Public Company 

Accounting Oversight Board (except in 

cases where you were an original source 

of this information as defined in 

paragraph (b)(4) of this section), and 

your information would not otherwise 

have been obtained and was essential to 

the success of the action. 

(d) Action means a single captioned 

judicial or administrative proceeding. 

(e) Monetary sanctions means any 

money, including penalties, 

disgorgement, and interest, ordered to 

be paid and any money deposited into 

a disgorgement fund or other fund 

pursuant to Section 308(b) of the 

Sarbanes-Oxley Act of 2002, 15 U.S.C. 

7246(b), as a result of a Commission 

action or a related action. 

(f) Appropriate regulatory agency 

means the Commission, the Comptroller 

of the Currency, the Board of Governors 

of the Federal Reserve System, the 

Federal Deposit Insurance Corporation, 

the Office of Thrift Supervision, and any 

other agencies that may be defined as 

appropriate regulatory agencies under 

Section 3(a)(34) of the Exchange Act (15 

U.S.C. 78c(a)(34)). 

(g) Self-regulatory organization means 

any national securities exchange, 

registered securities association, 

registered clearing agency, the 

Municipal Securities Rulemaking Board, 

and any other organizations that may be 

defined as self-regulatory organizations 

under Section 3(a)(26) of the Exchange 

Act (15 U.S.C. 78c(a)(26)). 

§ 240.21F–5 Amount of award. 

(a) If all of the conditions are met for 

a whistleblower award in connection 

with a Commission action or a related 

action, the Commission will then decide 

the amount of the award pursuant to the 

procedures set forth in §§ 240.21F–10 

and 240.21F–11 of this chapter. The 

amount will be at least 10 percent and 

no more than 30 percent of the 

monetary sanctions that the 

Commission and the other authorities 

are able to collect. The percentage 

awarded in connection with a 

Commission action may differ from the 

percentage awarded in connection with 

a related action. 

(b) If the Commission makes awards 

to more than one whistleblower in 

connection with the same action or 

related action, the Commission will 

determine an individual percentage 

award for each whistleblower, but in no 

event will the total amount awarded to 

all whistleblowers as a group be less 

than 10 percent or greater than 30 

percent of the amount the Commission 

or the other authorities collect. 

§ 240.21F–6 Criteria for determining 

amount of award. 

In determining the amount of an 

award, the Commission will take into 

consideration: 

(a) The significance of the information 

provided by a whistleblower to the 

success of the Commission action or 

related action; 

(b) The degree of assistance provided 

by the whistleblower and any legal 

representative of the whistleblower in 

the Commission action or related action; 

(c) The programmatic interest of the 

Commission in deterring violations of 

the securities laws by making awards to 

whistleblowers who provide 

information that leads to the successful 

enforcement of such laws; and 

(d) Whether the award otherwise 

enhances the Commission’s ability to 

enforce the Federal securities laws, 

protect investors, and encourage the 

submission of high quality information 

from whistleblowers. 

§ 240.21F–7 Confidentiality of 

submissions. 

(a) The law requires that the 

Commission not disclose information 

that could reasonably be expected to 

reveal the identity of a whistleblower, 


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except that the Commission may 

disclose such information in the 

following circumstances: 

(1) When disclosure is required to a 

defendant or respondent in connection 

with a Federal court or administrative 

action that the Commission files or in 

another public action or proceeding that 

is filed by an authority to which we 

provide the information, as described 

below; 

(2) When the Commission determines 

that it is necessary to accomplish the 

purposes of the Exchange Act and to 

protect investors, it may provide your 

information to the Department of 

Justice, an appropriate regulatory 

agency, a self regulatory organization, a 

state attorney general in connection 

with a criminal investigation, any 

appropriate state regulatory authority, 

the Public Company Accounting 

Oversight Board, or foreign securities 

and law enforcement authorities. Each 

of these entities other than foreign 

securities and law enforcement 

authorities is subject to the 

confidentiality requirements set forth in 

Section 21F(h) of the Exchange Act, 15 

U.S.C. 78u–6(h). The Commission may 

determine what assurances of 

confidentiality it deems appropriate in 

providing such information to foreign 

securities and law enforcement 

authorities. 

(3) The Commission may make 

disclosures in accordance with the 

Privacy Act of 1974 (5 U.S.C. 552a). 

(b) You may submit information to the 

Commission anonymously. If you do so, 

however, you must also do the 

following: 

(1) You must have an attorney 

represent you in connection with both 

your submission of information and 

your claim for an award, and your 

attorney’s name and contact information 

must be provided to the Commission at 

the time you submit your information; 

(2) You and your attorney must follow 

the procedures set forth in § 240.21F–9 

of this chapter for submitting original 

information anonymously; and 

(3) Before the Commission will pay 

any award to you, you must disclose 

your identity and your identity must be 

verified as set forth in § 240.21F–10 of 

this chapter. 

§ 240.21F–8 Eligibility. 

(a) To be eligible for a whistleblower 

award, you must give the Commission 

information in the form and manner that 

the Commission requires. The 

procedures for submitting information 

and making a claim for an award are 

described in § 240.21F–9 to § 240.21F– 

11 of this chapter. You should read 

these procedures carefully because you 

need to follow them in order to be 

eligible for an award, except that the 

Commission may, in its sole discretion, 

waive any of these procedures based 

upon a showing of extraordinary 

circumstances. 

(b) In addition to any forms required 

by these rules, the Commission may also 

require that you provide certain 

additional information. If requested by 

Commission staff, you may be required 

to: 

(1) Provide explanations and other 

assistance in order that the staff may 

evaluate and use the information that 

you submitted; 

(2) Provide all additional information 

in your possession that is related to the 

subject matter of your submission in a 

complete and truthful manner, through 

follow-up meetings, or in other forms 

that our staff may agree to; 

(3) Provide testimony or other 

evidence acceptable to the staff relating 

to whether you are eligible, or otherwise 

satisfy any of the conditions, for an 

award; and 

(4) Enter into a confidentiality 

agreement in a form acceptable to the 

Whistleblower Office, including a 

provision that a violation may lead to 

your ineligibility to receive an award. 

(c) You are not eligible to be 

considered for an award if you do not 

satisfy the requirements of paragraphs 

(a) and (b) of this section. In addition, 

you are not eligible if: 

(1) You are, or were at the time you 

acquired original information, a 

member, officer, or employee of the 

Department of Justice, an appropriate 

regulatory agency, a self-regulatory 

organization, the Public Company 

Accounting Oversight Board, or any law 

enforcement organization; 

(2) You are, or were at the time you 

acquired original information, a 

member, officer, or employee of a 

foreign government, any political 

subdivision, department, agency, or 

instrumentality of a foreign government, 

or any other foreign financial regulatory 

authority as that term is defined in 

Section 3(a)(52) of the Exchange Act 

(15 U.S.C. 78c(a)(52)); 

(3) You are convicted of a criminal 

violation that is related to the 

Commission action or to a related action 

(as defined in § 240.21F–4 of this 

chapter) for which you otherwise could 

receive an award; 

(4) You obtained the information that 

you gave the Commission through an 

audit of a company’s financial 

statements, and making a whistleblower 

submission would be contrary to the 

requirements of Section 10A of the 

Exchange Act (15 U.S,C. 78j–1)); or 

(5) You acquired the information you 

gave the Commission from any of the 

individuals described in paragraphs 

(c)(1), (2), (3), or (4) of this section; 

(6) You are the spouse, parent, child, 

or sibling of a member or employee of 

the Commission, or you reside in the 

same household as a member or 

employee of the Commission; or 

(7) In your whistleblower submission, 

your other dealings with the 

Commission, or your dealings with 

another authority in connection with a 

related action, you knowingly and 

willfully make any false, fictitious, or 

fraudulent statement or representation, 

or use any false writing or document, 

knowing that it contains any false, 

fictitious, or fraudulent statement or 

entry. 

§ 240.21F–9 Procedures for submitting 

original information. 

The submission of original 

information to the Commission is a twostep process: 

(a) First, you will need to submit your 

information to us. You may submit your 

information: 

(1) Online, through the Commission’s 

Electronic Data Collection System, or; 

(2) By completing Form TCR (Tip, 

Complaint or Referral) (referenced in 

§ 249.1800 of this chapter) and mailing 

or faxing the form to the SEC 

Whistleblower Office, 100 F Street, NE., 

Washington, DC 20549–XXXX, Fax 

(202) XXX–XXXX. 

(b) Second, in addition to submitting 

your information pursuant to paragraph 

(a) of this section, you will also need to 

complete and provide to the 

Commission a Form WB–DEC, 

Declaration Concerning Original 

Information Provided Pursuant to § 21F 

of the Securities Exchange Act of 1934, 

signed under penalty of perjury. Your 

Form WB–DEC must be submitted as 

follows: 

(1) If you submit your information 

online, your FORM WB–DEC 

(referenced in § 249.1801 of this 

chapter) must be submitted either: 

(i) Electronically (in accordance with 

the instructions set forth on the 

Commission’s Web site); or 

(ii) By mailing or faxing the signed 

form to the SEC Whistleblower Office. 

Your Form WB–DEC (referenced in 

§ 249.1801 of this chapter) must be 

received within thirty (30) days of the 

Commission’s receipt of your 

information in the Electronic Data 

Collection System. 

(2) If you submit a Form TCR 

(referenced in § 249.1800 of this 

chapter), your Form WB–DEC 

(referenced in § 249.1801 of this 


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chapter) must be submitted by mail or 

fax at the same time as the Form TCR. 

(c) Notwithstanding paragraph (b) of 

this section, if you submitted your 

original information to the Commission 

anonymously, then you must provide 

your attorney with the completed and 

signed Form WB–DEC (referenced in 

§ 249.1801 of this chapter). In addition, 

your attorney must also provide the 

Commission with a separate Form 

WB–DEC certifying that he or she has 

verified your identity, has reviewed the 

form for completeness and accuracy, 

and will retain the signed original of 

your Form WB–DEC in his or her 

records. Such certification must be 

submitted in the manner described in 

paragraph (b) of this section. 

(d) If you submitted original 

information in writing to the 

Commission after July 21, 2010 (the date 

of enactment of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act) but before the effective date of 

these rules, you will be eligible for an 

award only if: 

(1) In the event that you provided the 

original information to the Commission 

in a format or manner other than that 

described in paragraph (a) of this 

section, you either submit your 

information online through the 

Commission’s Electronic Data 

Collection System or complete Form 

TCR (referenced in § 249.1800 of this 

chapter) within one hundred twenty 

(120) days of the effective date of these 

rules and otherwise follow the 

procedures set forth in paragraph (b) of 

this section; or 

(2) In the event that you provided the 

original information to the Commission 

in the format or manner described in 

paragraph (a) of this section you submit 

a Form WB–DEC (referenced in 

§ 249.1801 of this chapter) within one 

hundred twenty (120) days of the 

effective date of this section in the 

manner set forth in paragraph (b) of this 

section. 

§ 240.21F–10 Procedures for making a 

claim for a whistleblower award in SEC 

actions that result in monetary sanctions in 

excess of $1,000,000. 

(a) Whenever a Commission action 

results in monetary sanctions totaling 

more than $1,000,000, the 

Whistleblower Office will cause to be 

published on the Commission’s Web 

site a ‘‘Notice of Covered Action.’’ Such 

Notice will be published subsequent to 

the entry of a final judgment or order 

that alone, or collectively with other 

judgments or orders previously entered 

in the Commission action, exceeds 

$1,000,000; or, in the absence of such 

judgment or order, within thirty (30) 

days of the deposit of monetary 

sanctions exceeding $1,000,000 into a 

disgorgement or other fund pursuant to 

Section 308(b) of the Sarbanes-Oxley 

Act of 2002. A claimant will have sixty 

(60) days from the date of the Notice of 

Covered Action to file a claim for an 

award based on that action, or the claim 

will be barred. 

(b) To file a claim for a whistleblower 

award, you must file Form WB–APP, 

Application for Award for Original 

Information Provided Pursuant to § 21F 

of the Securities Exchange Act of 1934 

(referenced in § 249.1802 of this 

chapter). You must sign this form as the 

claimant and submit it to the 

Whistleblower Office by mail or fax. All 

claim forms, including any attachments, 

must be received by the Whistleblower 

Office within sixty (60) calendar days of 

the date of the Notice of Covered Action 

in order to be considered for an award. 

(c) If you provided your original 

information to the Commission 

anonymously, you must disclose your 

identity on the Form WB–APP 

(referenced in § 249.1802 of this 

chapter), and your identity must be 

verified in a form and manner that is 

acceptable to the Whistleblower Office 

prior to the payment of any award. 

(d) Once the time for filing any 

appeals of the Commission’s judicial or 

administrative action has expired, or 

where an appeal has been filed, after all 

appeals in the action have been 

concluded, the Whistleblower Office 

and designated staff (‘‘Claims Review 

Staff’’) will evaluate all timely 

whistleblower award claims submitted 

on Form WB–APP (referenced in 

§ 249.1802 of this chapter) in 

accordance with the criteria set forth in 

these rules. In connection with this 

process, the Whistleblower Office may 

require that you provide additional 

information relating to your eligibility 

for an award or satisfaction of any of the 

conditions for an award, as set forth in 

§ 240.21F–(8)(b) of this chapter. 

Following that evaluation, the 

Whistleblower Office will send you a 

Preliminary Determination setting forth 

a preliminary assessment as to whether 

the claim should be allowed or denied 

and, if allowed, setting forth the 

proposed award percentage amount. 

(e) You may contest the Preliminary 

Determination made by the Claims 

Review Staff by submitting a written 

response to the Whistleblower Office 

setting forth the grounds for your 

objection to either the denial of an 

award or the proposed amount of an 

award. You may also include 

documentation or other evidentiary 

support for the grounds advanced in 

your response. 

(1) Before determining whether to 

contest a Preliminary Determination, 

you may: 

(i) Within thirty (30) days of the date 

of the Preliminary Determination, 

request that the Whistleblower Office 

make available for your review the 

materials that formed the basis of the 

Claims Review Staff’s Preliminary 

Determination. The Whistleblower 

Office will make these materials 

available to you subject to any 

redactions necessary to comply with 

any statutory restrictions or protect the 

Commission’s law enforcement and 

regulatory functions. The Whistleblower 

Office may also require you to sign a 

confidentiality agreement, as set forth in 

§ 240.21F–(8)(b) of this chapter, prior to 

providing these materials. 

(ii) Within thirty (30) calendar days of 

the date of the Preliminary 

Determination, request a meeting with 

the Whistleblower Office; however, 

such meetings are not required and the 

office may in its sole discretion decline 

the request. 

(2) If you decide to contest the 

Preliminary Determination, you must 

submit your written response and 

supporting materials within thirty (30) 

calendar days of the date of the 

Preliminary Determination, or if a 

request to review materials is made 

pursuant to paragraph (e)(1) of this 

section, then within thirty (30) calendar 

days of the Whistleblower Office 

making those materials available for 

your review. 

(f) If you fail to submit a timely 

response pursuant to paragraph (e) of 

this section, then the Preliminary 

Determination will become the Final 

Order of the Commission (except where 

the Preliminary Determination 

recommended an award, in which case 

the Preliminary Determination will be 

deemed a Proposed Final Determination 

for purposes of paragraph (h) of this 

section). Your failure to submit a timely 

response contesting a Preliminary 

Determination will constitute a failure 

to exhaust administrative remedies, and 

you will be prohibited from pursuing an 

appeal pursuant to § 240.21F–12 of this 

chapter. 

(g) If you submit a timely response 

pursuant to paragraph (e) of this section, 

then the Claims Review Staff will 

consider the issues and grounds 

advanced in your response, along with 

any supporting documentation you 

provided, and will make its Proposed 

Final Determination. 

(h) The Whistleblower Office will 

then notify the Commission of each 

Proposed Final Determination. Within 

thirty 30 days thereafter, any 

Commissioner may request that the 


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Proposed Final Determination be 

reviewed by the Commission. If no 

Commissioner requests such a review 

within the 30-day period, then the 

Proposed Final Determination will 

become the Final Order of the 

Commission. In the event a 

Commissioner requests a review, the 

Commission will review the record that 

the staff relied upon in making its 

determinations, including your previous 

submissions to the Whistleblower 

Office, and issue its Final Order. 

(i) The Office of the Secretary of the 

SEC will provide you with the Final 

Order of the Commission. 

§ 240.21F–11 Procedures for determining 

awards based upon a related action. 

(a) If you are eligible to receive an 

award following a Commission action 

that results in monetary sanctions 

totaling more than $1,000,000, you also 

may be eligible to receive an award 

based on the monetary sanctions that 

are collected from a related action (as 

defined in § 240.21F–3 of this chapter). 

(b) You must also use Form WB–APP 

(referenced in § 249.1802 of this 

chapter) to submit a claim for an award 

in a related action. You must sign this 

form as the claimant and submit it to the 

Whistleblower Office by mail or fax as 

follows: 

(1) If a final order imposing monetary 

sanctions has been entered in a related 

action at the time you submit your claim 

for an award in connection with a 

Commission action, you must submit 

your claim for an award in that related 

action on the same Form WB–APP 

(referenced in § 249.1802 of this 

chapter) that you use for the 

Commission action. 

(2) If a final order imposing monetary 

sanctions in a related action has not 

been entered at the time you submit 

your claim for an award in connection 

with a Commission action, you must 

submit your claim on Form WB–APP 

(referenced in § 249.1802 of this 

chapter) within sixty (60) days of the 

issuance of a final order imposing 

sanctions in the related action. 

(c) The Whistleblower Office may 

request additional information from you 

in connection with your claim for an 

award in a related action to demonstrate 

that you directly (or through the 

Commission) voluntarily provided the 

governmental agency, regulatory 

authority or self-regulatory organization 

the same original information that led to 

the Commission’s successful covered 

action, and that this information led to 

the successful enforcement of the 

related action. The Whistleblower Office 

may, in its discretion, seek assistance 

and confirmation from the other agency 

in making this determination. 

(d) Once the time for filing any 

appeals of the final judgment or order in 

a related action has expired, or if an 

appeal has been filed, after all appeals 

in the action have been concluded, the 

Claims Review Staff will evaluate all 

timely whistleblower award claims 

submitted on Form WB–APP 

(referenced in § 249.1802 of this 

chapter) in connection with the related 

action. The evaluation will be 

undertaken pursuant to the criteria set 

forth in these rules. In connection with 

this process, the Whistleblower Office 

may require that you provide additional 

information relating to your eligibility 

for an award or satisfaction of any of the 

conditions for an award, as set forth in 

§ 240.21F–(8)(b) of this chapter. 

Following this evaluation, the 

Whistleblower Office will send you a 

Preliminary Determination setting forth 

a preliminary assessment as to whether 

the claim should be allowed or denied 

and, if allowed, setting forth the 

proposed award percentage amount. 

(e) You may contest the Preliminary 

Determination made by the Claims 

Review Staff by submitting a written 

response to the Whistleblower Office 

setting forth the grounds for your 

objection to either the denial of an 

award or the proposed amount of an 

award. You may also include 

documentation or other evidentiary 

support for the grounds advanced in 

your response. 

(1) Before determining whether to 

contest a Preliminary Determination, 

you may: 

(i) Within thirty (30) days of the date 

of the Preliminary Determination, 

request that the Whistleblower Office 

make available for your review the 

materials that formed the basis of the 

Claims Review Staff’s Preliminary 

Determination. The Whistleblower 

Office will make these materials 

available to you subject to any 

redactions necessary to comply with 

any statutory restrictions or protect the 

Commission’s law enforcement and 

regulatory functions. The Whistleblower 

Office may also require you to sign a 

confidentiality agreement, as set forth in 

§ 240.21F–(8)(b) of this chapter, prior to 

providing these materials. 

(ii) Within thirty (30) calendar days of 

the date of the Preliminary 

Determination, request a meeting with 

the Whistleblower Office; however, 

such meetings are not required and the 

office may in its sole discretion decline 

the request. 

(2) If you decide to contest the 

Preliminary Determination, you must 

submit your written response and 

supporting materials within thirty (30) 

calendar days of the date of the 

Preliminary Determination, or if a 

request to review materials is made 

pursuant to paragraph (e)(1)(i) of this 

section, then within thirty (30) calendar 

days of the Whistleblower Office 

making those materials available for 

your review. 

(f) If you fail to submit a timely 

response pursuant to paragraph (e) of 

this section, then the Preliminary 

Determination will become the Final 

Order of the Commission (except where 

the Preliminary Determination 

recommended an award, in which case 

the Preliminary Determination will be 

deemed a Proposed Final Determination 

for purposes of paragraph (h) of this 

section). Your failure to submit a timely 

response contesting a Preliminary 

Determination will constitute a failure 

to exhaust administrative remedies, and 

you will be prohibited from pursuing an 

appeal pursuant to § 240.21F–12 of this 

chapter. 

(g) If you submit a timely response 

pursuant to paragraph (e) of this section, 

then the Claims Review Staff will 

consider the issues and grounds that 

you advanced in your response, along 

with any supporting documentation you 

provided, and will make its Proposed 

Final Determination. 

(h) The Whistleblower Office will 

then notify the Commission of each 

Proposed Final Determination. Within 

thirty (30) days thereafter, any 

Commissioner may request that the 

Proposed Final Determination be 

reviewed by the Commission. If no 

Commissioner requests such a review 

within the 30-day period, then the 

Proposed Final Determination will 

become the Final Order of the 

Commission. In the event a 

Commissioner requests a review, the 

Commission will review the record that 

the staff relied upon in making its 

determinations, including your previous 

submissions to the Whistleblower 

Office, and issue its Final Order. 

(i) The Office of the Secretary of the 

SEC will provide you with the Final 

Order of the Commission. 

§ 240.21F–12 Appeals. 

(a) Section 21F of the Exchange Act, 

15 U.S.C. 78u–6, commits 

determinations of whether, to whom, 

and in what amount to make awards to 

the Commission’s discretion. A 

determination of whether or to whom to 

make an award may be appealed within 

30 days after the Commission issues its 

final decision to the United States Court 

of Appeals for the District of Columbia 

Circuit, or to the circuit where the 

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principal place of business. Where the 

Commission followed the statutory 

mandate that it award not less than 10 

percent and not more than 30 percent of 

the monetary sanctions collected in the 

Commission or related action, the 

Commission’s determination regarding 

the amount of an award (including the 

allocation of an award as between 

multiple whistleblowers) is not 

appealable. 

(b) The record on appeal shall consist 

of the Whistleblower Office’s 

Preliminary Determination, any 

materials submitted by the claimant or 

claimants (including the claimant’s 

Form TCR (referenced in § 249.1800 of 

this chapter) or any electronic 

submission made by the whistleblower, 

the Forms WB–DEC (referenced in 

§ 249.1801 of this chapter) and WB–APP 

(referenced in § 249.1802 of this 

chapter), and materials filed in response 

to the Preliminary Determination), and 

any other materials that supported the 

Final Order of the Commission, with the 

exception of internal deliberative 

process materials that are prepared 

exclusively to assist the Commission in 

deciding the claim (including the staff’s 

Draft Final Determination in the event 

that the Commissioners reviewed the 

claim and issued the Final Order). 

§ 240.21F–13 Procedures applicable to the 

payment of awards. 

(a) Any award made pursuant to these 

rules will be paid from the Securities 

and Exchange Commission Investor 

Protection Fund (the ‘‘Fund’’). 

(b) A recipient of a whistleblower 

award is entitled to payment on the 

award only to the extent that a monetary 

sanction is collected in the Commission 

action or in a related action upon which 

the award is based. 

(c) Payment of a whistleblower award 

for a monetary sanction collected in a 

Commission action or related action 

shall be made following the later of: 

(1) The date on which the monetary 

sanction is collected; or 

(2) The completion of the appeals 

process for all whistleblower award 

claims arising from: 

(i) The Notice of Covered Action, in 

the case of any payment of an award for 

a monetary sanction collected in a 

Commission action; or 

(ii) The related action, in the case of 

any payment of an award for a monetary 

sanction collected in a related action. 

(d) If there are insufficient amounts 

available in the Fund to pay the entire 

amount of an award payment within a 

reasonable period of time from the time 

for payment specified by paragraph (c) 

of this section, then subject to the 

following terms, the balance of the 

payment shall be paid when amounts 

become available in the Fund, as 

follows: 

(1) Where multiple whistleblowers are 

owed payments from the Fund based on 

awards that do not arise from the same 

Notice of Covered Action (or related 

action), priority in making these 

payments will be determined based 

upon the date that the collections for 

which the whistleblowers are owed 

payments occurred. If two or more of 

these collections occur on the same 

date, those whistleblowers owed 

payments based on these collections 

will be paid on a pro rata basis until 

sufficient amounts become available in 

the Fund to pay their entire payments. 

(2) Where multiple whistleblowers are 

owed payments from the Fund based on 

awards that arise from the same Notice 

of Covered Action (or related action), 

they will share the same payment 

priority and will be paid on a pro rata 

basis until sufficient amounts become 

available in the Fund to pay their entire 

payments. 

§ 240.21F–14 No amnesty. 

The Securities Whistleblower 

Incentives and Protection provisions do 

not provide amnesty to individuals who 

provide information to the Commission. 

The fact that you may become a 

whistleblower and assist in Commission 

investigations and enforcement actions 

does not preclude the Commission from 

bringing an action against you based 

upon your own conduct in connection 

with violations of the Federal securities 

laws. If such an action is determined to 

be appropriate, however, the 

Commission will take your cooperation 

into consideration in accordance with 

its Policy Statement Concerning 

Cooperation by Individuals in [SEC] 

Investigations and Related Enforcement 

Actions (17 CFR 202.12). 

§ 240.21F–15 Awards to whistleblowers 

who engage in culpable conduct. 

In determining whether the required 

$1,000,000 threshold has been satisfied 

(this threshold is further explained in 

§ 240.21F–10 of this chapter) for 

purposes of making any award, the 

Commission will not take into account 

any monetary sanctions that the 

whistleblower is ordered to pay, or that 

are ordered against any entity whose 

liability is based substantially on 

conduct that the whistleblower directed, 

planned, or initiated. Similarly, if the 

Commission determines that a 

whistleblower is eligible for an award, 

any amounts that the whistleblower or 

such an entity pay in sanctions as a 

result of the action or related actions 

will not be included within the 

calculation of the amounts collected for 

purposes of making payments. 

§ 240.21F–16 Staff communications with 

whistleblowers. 

(a) No person may take any action to 

impede a whistleblower from 

communicating directly with the 

Commission staff about a potential 

securities law violation, including 

enforcing, or threatening to enforce, a 

confidentiality agreement (other than 

agreements dealing with information 

covered by § 240.21F–4(b)(4)(i) and (ii) 

of this chapter related to the legal 

representation of a client) with respect 

to such communications. 

(b) If you are a whistleblower who is 

a director, officer, member, agent, or 

employee of an entity that has counsel, 

and you have initiated communication 

with the Commission relating to a 

potential securities law violation, the 

staff is authorized to communicate 

directly with you regarding the subject 

of your communication without seeking 

the consent of the entity’s counsel. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

3. The authority citation for Part 249 

is amended by adding the following 

citations in numerical order to read as 

follows: 

Authority: 15 U.S.C. 78a, et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

Section 249.1800 is also issued under Pub. 

L. 111.203, § 922(a), 124 Stat 1841 (2010). 

Section 249.1801 is also issued under Pub. 

L. 111.203, § 922(a), 124 Stat 1841 (2010). 

Section 249.1802 is also issued under Pub. 

L. 111.203, § 922(a), 124 Stat 1841 (2010). 

* * * * * 

4. Add Subpart S to read as follows: 

Subpart S—Whistleblower Forms 

Sec. 

249.1800 Form TCR, Tip, Complaint or 

Referral 

249.1801 Form WB–DEC, Declaration of 

Original Information Submitted Pursuant 

to Section 21F of the Securities Exchange 

Act of 1934 

249.1802 Form WB–APP, Application for 

Award for Original Information 

Submitted Pursuant to Section 21F of the 

Securities Exchange Act of 1934. 

§ 249.1800 Form TCR, Tip, Complaint or 

Referral. 

This form may be used by anyone 

wishing to provide the SEC with 

information concerning a violation of 

the Federal securities laws. The 

information provided may be disclosed 

to Federal, state, local, or foreign 

agencies responsible for investigating, 

prosecuting, enforcing, or implementing 


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the Federal securities laws, rules, or 

regulations consistent with the 

confidentiality requirements set forth in 

Section 21F(h)(2) of the Exchange Act, 

15 U.S.C. 78u–6(h)(2), and § 240.21F–7 

of this chapter. 

§ 249.1801 Form WB–DEC, Declaration of 

Original Information Submitted Pursuant to 

Section 21F of the Securities Exchange Act 

of 1934. 

This form must be used by persons 

who provide the SEC with information 

concerning a violation of the Federal 

securities laws and who wish to be 

considered for a whistleblower award 

pursuant to the SEC’s whistleblower 

program. The information provided will 

enable the Commission to determine 

your eligibility for payment of an award 

pursuant to Section 21F of the 

Securities Exchange Act of 1934, 15 

U.S.C. 78u–6. This information may be 

disclosed to Federal, state, local, or 

foreign agencies responsible for 

investigating, prosecuting, enforcing, or 

implementing the Federal securities 

laws, rules, or regulations consistent 

with the confidentiality requirements 

set forth in Section 21F(h)(2) of the 

Exchange Act, 15 U.S.C. 78u–6(h)(2), 

and § 240.21F–7 of this chapter. 

Furnishing the information is voluntary, 

but a decision not to do so may result 

in you not being eligible for award 

consideration. 

§ 249.1802 Form WB–APP, Application for 

Award for Original Information Submitted 

Pursuant to Section 21F of the Securities 

Exchange Act of 1934. 

This form must be used by persons 

making a claim for a whistleblower 

award in connection with information 

provided to the SEC or to another 

agency in a related action. The 

information provided will enable the 

Commission to determine your 

eligibility for payment of an award 

pursuant to Section 21F of the 

Securities Exchange Act of 1934, 15 

U.S.C. 78u–6. This information may be 

disclosed to Federal, state, local, or 

foreign agencies responsible for 

investigating, prosecuting, enforcing, or 

implementing the Federal securities 

laws, rules, or regulations consistent 

with the confidentiality requirements 

set forth in Section 21F(h)(2) of the 

Exchange Act, 15 U.S.C. 78u–6(h)(2) 

and § 240.21F–7 of this chapter. 

Furnishing the information is voluntary, 

but a decision not to do so may result 

in you not being eligible for award 

consideration. 

Note: The following Forms will not appear 

in the Code of Federal Regulations. 

BILLING CODE 8011–01–P 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 70549 


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70550 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 


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70552 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Proposed Rules 70555 

By the Commission. 

Dated: November 3, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–28186 Filed 11–16–10; 8:45 am] 

BILLING CODE 8011–01–C 


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