34702 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34–83557; File No. S7–16–18] 

RIN 3235–AM11 

Whistleblower Program Rules 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

proposing for public comment several 

amendments to the Commission’s rules 

implementing its whistleblower 

program. Section 21F of the Securities 

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

provides, among other things, that the 

Commission shall 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. On May 25, 2011, the 

Commission adopted a comprehensive 

set of rules to implement the 

whistleblower program. The proposed 

rules would make certain changes and 

clarifications to the existing rules, as 

well as several technical amendments. 

The Commission is also including 

interpretive guidance concerning the 

terms ‘‘unreasonable delay’’ and 

‘‘independent analysis.’’ 

DATES: Comments should be received on 

or before September 18, 2018. 

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.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number S7– 

16–18 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–16–18. This file number 

should be included on the subject line 

if email is used. To help us process and 

review your comments more efficiently, 

please use only one method of 

submission. The Commission will post 

all comments on the Commission’s 

internet website (http://www.sec/gov/ 

rules/proposed.shtml). Comments are 

also available for website 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 

10:00 a.m. and 3:00 p.m. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. 

Studies, memoranda or other 

substantive items may be added by the 

Commission or staff to the comment file 

during this rulemaking. A notification of 

the inclusion in the comment file of any 

such materials will be made available 

on the Commission’s website. To ensure 

direct electronic receipt of such 

notifications, sign up through the ‘‘Stay 

Connected’’ option at www.sec.gov to 

receive notifications by email. 

FOR FURTHER INFORMATION CONTACT: 

Emily Pasquinelli, Office of the 

Whistleblower, Division of 

Enforcement, at (202) 551–5973; Brian 

A. Ochs, Office of the General Counsel, 

at (202) 551–5067, Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The 

Commission is proposing to amend 17 

CFR 240.21F–3 (‘‘Rule 21F–3’’), 

240.21F–4 (‘‘Rule 21F–4’’), 240.21F–6 

(‘‘Rule 21F–6’’), 240.21F–8 (‘‘Rule 21F– 

8’’) through 240.21F–13 (‘‘Rule 21F– 

13’’). The Commission is also proposing 

to add a new rule that would be codified 

as 17 CFR 240.21F–18 (‘‘Rule 21F–18’’). 

Table of Contents 

I. Background 

A. The Whistleblower Award Program 

B. Overview of the Proposed Rule Changes 

and Other Items 

II. Discussion of Proposed Amendments 

A. Proposed Amendment to Exchange Act 

Rule 21F–4(d) Defining an ‘‘action’’ 

B. Proposed Amendment to Exchange Act 

Rule 21F–4(e) Defining ‘‘monetary 

sanctions’’ 

C. Proposed Amendment to Exchange Act 

Rule 21F–3(b)(1) Defining ‘‘related 

action’’ 

D. Proposed Amendment to Exchange Act 

Rule 21F–6 Regarding Awards to a 

Single Whistleblower Below $2 Million 

or in Cases Yielding at Least $100 

Million in Collected Monetary Sanctions 

and Guidance on the Meaning of 

‘‘unreasonable delay’’ Under Rule 21F–6 

E. Proposed Amendment to Exchange Act 

Rule 21F–2 Addressing Whistleblower 

Status and Certain Threshold Criteria 

Related to Award Eligibility, Heightened 

Confidentiality From Identity Disclosure, 

and Employment Anti-Retaliation 

Protection 

F. Proposed Amendment to Rule 21F–8 To 

Add New Paragraph (d) To Provide the 

Commission With Additional Flexibility 

Regarding the Forms Used in Connection 

With the Whistleblower Program (and 

Corresponding Amendments to Rule 

21F–10, Rule 21F–11, and Rule 21F–12) 

G. Proposed Amendment to Rule 21F–8 To 

Add New Paragraph (e) To Clarify and 

Enhance the Commission’s Authority To 

Address Claimants Who Submit False 

Information to the Commission or Who 

Abuse the Award Application Process 

H. Proposed Amendments to Rule 21F–9 

To Provide Additional Flexibility and 

Clarity Regarding Form TCR (and 

Corresponding Technical Amendments 

to Rule 21F–10, Rule 21F–11, and Rule 

21F–12) 

I. Proposed Amendment to Rule 21F–12 

Regarding the Materials That May Form 

the Basis of the Commission’s Award 

Determination 

J. Proposed Amendment to Rule 21F–13 

Regarding the Administrative Record on 

Appeal 

K. Proposed Rule 21F–18 Establishing a 

Summary Disposition Process 

L. Technical Amendment to Rule 21F– 

4(c)(2) 

III. Proposed Interpretive Guidance 

Regarding the Meaning and Application 

of ‘‘independent analysis’’ as Defined in 

Exchange Act Rule 21F–4(b)(3) 

A. Background: ‘‘Original Information’’ and 

Publicly Available Information 

B. ‘‘Independent Analysis’’ 

C. Leads to Successful Enforcement 

IV. Request for Comment Regarding a 

Potential Discretionary Award 

Mechanism for Commission Actions 

That Do Not Qualify as Covered Actions, 

Involve Only a De Minimis Collection of 

Monetary Sanctions, or Are Based on 

Publicly Available Information 

V. General Request for Public Comment 

VI. Paperwork Reduction Act 

A. Background 

B. Summary of the Proposed Amendments 

C. Burden and Cost Estimates Related to 

the Proposed Amendments 

D. Mandatory Collection of Information 

E. Confidentiality 

F. Request for Comment 

VII. Economic Analysis 

A. Economic Baseline 

1. Whistleblower Programs 

2. Supreme Court Decision in Digital 

Realty Trust, Inc. v. Somers 

3. IPF and Awards Issued by the SEC 

Whistleblower Program 

4. Estimates of Current Annual Wages 

B. Analysis of Benefits, Costs, and 

Economic Effects of the Proposed Rules 

1. Proposed Amendments to Rule 21F–2 

2. Proposed Rule 21F–3(b)(4) 

3. Proposed Rule 21F–4(d)(3) 

4. Proposed Rule 21F–6(c) 

5. Proposed Rule 21F–6(d) 

6. Proposed Rule 21F–8(e) 

7. Proposed Rule 21F–18 

8. Proposed Interpretive Guidance 

Regarding the Meaning and Application 

of ‘‘independent analysis’’ as Defined in 

Exchange Act Rule 21F–4(b)(3) 


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Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 34703 

1 15 U.S.C. 78u–6. 

2 15 U.S.C. 78u–6(a)(1). 

3 15 U.S.C. 78u–6(a)(5). 

4The average (mean) of these awards was 

approximately $38 million and the median award 

was approximately $33 million. 

5 17 CFR 240.21F–4(d). 

7 17 CFR 240.21F–3(b)(1). 

C. Effects of the Proposed Rules on 

Efficiency, Competition, and Capital 

Formation 

IX. Small Business Regulatory Enforcement 

Fairness Act 

X. Regulatory Flexibility Act Certification 

XI. Statutory Basis 

List of Subjects in 17 CFR Parts 240 and 249 

Text of the Proposed Amendments 

I. Background 

A. The Whistleblower Award Program 

In July 2010, Congress amended the 

Exchange Act to add new Section 21F.1

That provision, entitled ‘‘Securities 

Whistleblower Incentives and 

Protection,’’ established the 

Commission’s whistleblower program. 

Among other things, 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 the successful enforcement of 

an action brought by the Commission 

that results in a covered judicial or 

administrative action 2 and certain 

related actions.3

In May 2011, the Commission 

adopted a comprehensive set of rules to 

implement the whistleblower program. 

Those rules, which are codified at 17 

CFR 240.21F–1 through 240.21F–17, 

provide the operative definitions, 

requirements, and processes related to 

the whistleblower program. Among 

other things, these rules: 

• Define key terms and phrases in 

Section 21F that determine whether an 

individual’s information qualifies for an 

award—terms such as ‘‘original 

information,’’ ‘‘voluntary,’’ and ‘‘leads 

to successful enforcement’’; 

• specify the form and manner in 

which an individual must submit 

information to qualify as a 

whistleblower eligible for an award; 

• establish the procedures for 

anonymous submissions; 

• exclude certain individuals from 

eligibility, such as individuals who are, 

or were at the time that they acquired 

the original information provided to the 

Commission, a member, officer, or 

employee of a foreign government; 

• explain which law-enforcement 

proceedings undertaken by other 

authorities may qualify for a related 

action award from the Commission; 

• establish the procedures for 

determining awards both in 

Commission actions and related actions; 

and 

• identify the criteria that the 

Commission will consider in setting the 

percentage amount of an award. 

The Commission’s whistleblower 

program has made significant 

contributions to the effectiveness of the 

Commission’s enforcement of the 

federal securities laws. The Commission 

has received over 22,000 whistleblower 

tips since the inception of the program 

through the end of Fiscal Year 2017. 

Original information provided by 

whistleblowers has led to enforcement 

actions in which the Commission has 

obtained over $1.4 billion in financial 

remedies, including more than $740 

million in disgorgement of ill-gotten 

gains and interest, the majority of which 

has been or is scheduled to be returned 

to harmed investors. The Commission 

has ordered over $266 million in 

whistleblower awards to 55 individuals 

whose information and cooperation 

assisted the Commission in bringing 

successful enforcement actions and, in 

some instances, other enforcement 

authorities in bringing related actions 

against wrongdoers. That said, 

approximately $112 million of that 

amount was paid to just four 

individuals in connection with two 

Commission enforcement actions and a 

related action.4

We recognize that individuals who 

step forward to provide information to 

the Commission may do so at great 

personal peril and professional sacrifice. 

We view the three key tenets of the 

program—monetary awards, 

confidentiality, and retaliation 

protections—as complementary and 

critical to the success of the program. 

B. Overview of the Proposed Rule 

Changes and Other Items 

After nearly seven years of experience 

administering the whistleblower 

program, we have identified various 

ways in which the program might 

benefit from additional rulemaking. We 

believe that the changes that we are 

proposing will build on the program’s 

success by continuing to encourage 

individuals to come forward and by 

permitting us to more efficiently process 

award applications, among other 

potential benefits. 

Based on our experience to date, we 

propose the following substantive 

amendments to our rules: 

• Allowing awards based on deferred 

prosecution agreements (‘‘DPAs’’) and 

non-prosecution agreements (‘‘NPAs’’) 

entered into by the U.S. Department of 

Justice (‘‘DOJ’’) or a state attorney 

general in a criminal case, or a 

settlement agreement entered into by 

the Commission outside of the context 

of a judicial or administrative 

proceeding to address violations of the 

securities laws: We propose an 

amendment that would expressly allow 

for the payment of awards based on 

money collected under these types of 

arrangements. Currently, our 

whistleblower rules do not address 

whether the Commission may pay an 

award when an eligible whistleblower 

voluntarily provides original 

information that leads to a DPA or NPA 

entered into by DOJ or a state attorney 

general in a criminal proceeding. Nor do 

our rules currently address whether the 

Commission may pay an award to an 

eligible whistleblower who voluntarily 

provides information that leads to a 

settlement agreement entered into by 

the Commission outside of the context 

of a judicial or administrative 

proceeding to address violations of the 

securities laws. We are proposing to 

amend the definition of an ‘‘action’’ in 

Rule 21F–4(d) 5 to include, as 

administrative actions, these 

arrangements, with the money paid 

under such arrangements deemed to be 

‘‘monetary sanctions’’ under Rule 21F– 

4(e),6 and, thus to expressly permit us 

to pay awards thereon. 

• Elimination of potential double 

recovery under the current definition of 

related action: We propose an 

amendment to our rules to clarify that 

a law-enforcement action would not 

qualify as a related action if the 

Commission determines that there is a 

separate whistleblower award scheme 

that more appropriately applies to the 

enforcement action. Although neither 

Section 21F of the Exchange Act (nor 

the whistleblower program rules 

thereunder) expressly addresses this 

situation, the Commission and the 

Claims Review Staff in the context of 

processing award applications have 

interpreted the term ‘‘related action’’ 

under Section 21F to exclude those 

matters brought by one of the entities 

listed in Rule 21F–3(b)(1) 7 for which 

there is a more directly applicable 

award program. The proposed rule 

would codify this interpretation. 

• Additional considerations for small 

and exceedingly large awards: In the 

context of potential awards that could 

yield a payout of $2 million or less to 

a whistleblower, the proposed rules 

would authorize the Commission to 

adjust the award percentage upward 

under certain circumstances (subject to 

the 30% statutory maximum) to an 


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8 In determining whether a large award would 

provide a payout that goes beyond what would be 

necessary to achieve the program’s goals, we 

anticipate that the Commission would consider, 

among other factors, the value of the 

whistleblower’s information and the personal and 

professional sacrifices made in reporting the 

information. 

9By statute, the IPF ‘‘is established in the 

Treasury of the United States’’ and ‘‘is available to 

the Commission, without further appropriation or 

fiscal year limitation,’’ to pay ‘‘awards to 

whistleblowers’’ under Section 21F(b). Exchange 

Act § 21F(g)(1), 15 U.S.C. 78–6(g)(1). The IPF may 

also be used to fund certain limited activities of the 

Inspector General and the Office of the 

Whistleblower. As of the end May 2018, the balance 

of the IPF for the first time fell below the $300 

million threshold that triggers the statutory 

replenishment mechanism; this occurred when the 

Commission paid $83 million—its largest payout to 

date on an enforcement action—to three 

individuals. For a complete description of the 

mechanisms that Congress established to replenish 

the IPF, see Section 21F(g)(3) of the Exchange Act, 

15 U.S.C. 78–6(g)(3). Generally speaking, the IPF is 

funded in the following way: (i) Deposits of any 

monetary sanction collected by the Commission in 

any judicial or administrative action brought by the 

Commission under the securities laws that is not 

added to a disgorgement fund or other fund under 

section 308 of the Sarbanes-Oxley Act of 2002 (15 

U.S.C. 7246) or otherwise distributed to victims of 

a violation of the securities laws, unless the balance 

of the IPF at the time the monetary sanction is 

collected exceeds $300,000,000; (ii) deposits of any 

monetary sanction added to a disgorgement fund or 

other fund under section 308 of the Sarbanes-Oxley 

Act of 2002 (15 U.S.C. 7246) that is not distributed 

to the victims for whom the fund was established, 

unless the balance of the disgorgement fund at the 

time the determination is made not to distribute the 

monetary sanction to such victims exceeds 

$200,000,000; and (iii) if the amounts deposited in 

the IPF under item (i) and (ii) above are not 

sufficient to satisfy a whistleblower award, the 

Commission must deposit money into the fund 

from the monetary sanctions collected in the 

covered action that the whistleblower’s information 

led to (even if the money could have been directed 

to victims of the violation) in an amount equal to 

the unsatisfied portion of the award. 

10Any funds used to replenish the IPF otherwise 

would be directed to the Treasury for use in 

funding other public programs. 

11 17 CFR 240.21F–2. 

12 138 S. Ct. 767 (2018). 

13 138 S. Ct. at 781–82. 

14 17 CFR 240.21F–4(e). 

15 17 CFR 240.21F–9. 

16 17 CFR 240.21F–8. 

17 17 CFR 249.1800 and 249.1801. 

18 17 CFR 240.21F–12. 

amount that the Commission determines 

more appropriately achieves the 

program’s objectives of rewarding 

meritorious whistleblowers and 

sufficiently incentivizing future 

whistleblowers who might otherwise be 

concerned about the low dollar amount 

of a potential award. Relatedly, in the 

context of potential awards that could 

yield total collected monetary sanctions 

of at least $100 million, the proposed 

rules would authorize the Commission 

to adjust the award percentage so that it 

would yield a payout (subject to the 

10% statutory minimum) that does not 

exceed an amount that is reasonably 

necessary to reward the whistleblower 

and to incentivize other similarly 

situated whistleblowers; however, in no 

event would the award be adjusted 

below $30 million.8 Currently, the 

whistleblower rules do not expressly 

permit the Commission to consider 

whether a relatively small or 

exceedingly large potential payout is 

appropriate to advance the program’s 

goals of rewarding whistleblowers and 

incentivizing future whistleblowers. We 

are proposing to amend the 

whistleblower program rules to include 

these considerations as additional 

award criteria. 

The three proposed rule changes 

described above are intended to serve 

two important and related objectives. 

First, the amendments are designed to 

help ensure that an eligible, meritorious 

whistleblower is appropriately 

rewarded for his or her efforts when the 

Commission or a related-action 

authority recovers monetary sanctions 

from wrongdoing that violates the 

securities laws. Second, the 

amendments would help ensure that the 

Investor Protection Fund (IPF) that 

Congress has established to pay 

meritorious whistleblowers is used in a 

manner that effectively and 

appropriately leverages the IPF to 

further the Commission’s lawenforcement objectives.9

We believe that using the IPF to 

compensate whistleblowers who come 

forward with original information that 

leads to a DPA or NPA entered into by 

DOJ or a state attorney general, or a 

settlement agreement entered into by 

the Commission outside of the context 

of a judicial or administrative 

proceeding (provided the total money 

required to be paid in the action, 

including any other proceedings that 

arise out of the same nucleus of 

operative facts, exceeds $1,000,000) 

achieves both of these objectives. We 

similarly believe that these objectives 

are furthered by providing the 

Commission with additional discretion 

to determine that an action does not 

qualify as a related action if Congress or 

another authority has established a more 

directly applicable or relevant award 

program. Additionally, we believe that 

these two objectives are furthered by 

authorizing the Commission to adjust 

upward the award percentage in certain 

cases where the award would otherwise 

yield a payout of $2 million or less to 

a whistleblower, as well as to consider 

whether, in the context of an award 

issued in connection with certain large 

Commission or related actions, any 

whistleblower award exceeds an 

amount that is reasonably necessary to 

advance the program’s goals. Absent 

this last amendment, the Commission 

may find itself faced with the possibility 

of paying out significantly large awards 

that are in excess of the amounts 

appropriate to advance the goals of the 

whistleblower program. These awards 

could substantially diminish the IPF, 

requiring the Commission to direct more 

funds to replenish the IPF rather than 

making that money available to the 

United States Treasury, where they 

could be used for other important public 

purposes.10

Beyond the amendments discussed 

above, we are proposing to modify 

Exchange Act Rule 21F–2.11 The 

amendments that we are proposing to 

this rule are in response to the Supreme 

Court’s recent decision in Digital Realty 

Trust, Inc. v. Somers.12 In that decision, 

the Court held that Section 21F(a)(6) of 

the Exchange Act unambiguously 

requires that an individual report a 

possible securities law violation to the 

Commission in order to qualify for 

employment retaliation protection, and 

that the Commission’s rule interpreting 

the anti-retaliation protections in 

Section 21F(h)(1) more broadly was 

therefore not entitled to deference.13 We 

are proposing to modify Rule 21F–2 so 

that it comports with the Court’s 

holding by, among other things, 

promulgating a uniform definition of 

‘‘whistleblower’’ that would apply to all 

aspects of Exchange Act Section 21F. 

We are also proposing to provide certain 

related clarifications to Rule 21F–2 and 

to address certain other interpretive 

questions that have arisen in connection 

with the Court’s holding. 

In addition to the foregoing 

amendments, we are proposing several 

other amendments that are intended to 

clarify and enhance certain policies, 

practices, and procedures in 

implementing the program. We are 

proposing to revise Exchange Act Rule 

21F–4(e) 14 to clarify the definition of 

‘‘monetary sanctions’’ so that it codifies 

the agency’s current understanding and 

application of that term. We are also 

proposing to revise Exchange Act Rule 

21F–9 15 to provide the Commission 

with additional flexibility to modify the 

manner in which individuals may 

submit Form TCR (Tip, Complaint or 

Referral). We are similarly proposing to 

revise Exchange Act Rule 21F–8 16 to 

provide the Commission with additional 

flexibility regarding the forms used in 

connection with the whistleblower 

program.17 Further, we are proposing an 

amendment to Exchange Act Rule 21F– 

12 18 to clarify the list of materials that 

the Commission may rely upon in 


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19 17 CFR 240.21F–13. 

20 17 CFR 240.21F–8. 

21 15 U.S.C. 78u–6(i). 

22 17 CFR 240.21F–8(c)(7). 

23 17 CFR 240.21F–4(c)(2). 

24 17 CFR 240.21F–9 through 240.21F–12. 

25 17 CFR 240–21F–4(b)(1)(i). 

26 In July 2014, the Commission received two 

petitions for rulemaking relating to the 

whistleblower program. The petitions for 

rulemaking can be found on the Commission’s 

website at this location: https://www.sec.gov/rules/ 

petitions.shtml. Both petitions sought the same or 

similar amendments to the whistleblower program 

rules in two respects. In connection with issuing 

this proposing release, we have considered the two 

petitions and determined to proceed as follows. 

First, to the extent that the petitions requested 

clarification through rulemaking in connection with 

employment anti-retaliation protections for internal 

reporting, we believe that the amendments we are 

proposing to Exchange Act Rule 21F–2 (discussed 

above) appropriately address this issue following 

the Supreme Court’s recent decision in Digital 

Realty. Second, to the extent the rulemaking 

petitions request that we add clarifying language to 

Exchange Act Rule 21F–17(a), 17 CFR 240.21F– 

17(a), we find the amendments unnecessary at this 

juncture because, as noted by the petitioners, ‘‘the 

plain language of Rule 21F–17 and existing case law 

compel the conclusion’’ that the contracts the 

petitioners are concerned with are already 

‘‘unenforceable[.]’’ See Exchange Act Rule 21F– 

17(a), 17 CFR 240.21F–17(a) (providing that no 

person may take any action to impede an individual 

from communicating directly with the Commission 

staff about a possible 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 the chapter related to the legal 

representation of a client) with respect to such 

communications.). In fact, the Commission has 

successfully brought nine enforcement actions for 

violations of Rule 21F–17. See generally SEC 

National Exam Program Risk Alert: Examining 

Whistleblower Rule Compliance at 1–2 & n. 3 

(October 24, 2016), available at https://

www.sec.gov/ocie/announcement/ocie-2016-riskalert-examining-whistleblower-rule-compliance.pdf 

(summarizing Commission enforcement actions). 

Finally, in accordance with Rule 192 of the 

Commission’s Rules of Practice, see 17 CFR 

201.192, the Secretary of the Commission shall 

notify the petitioners of the action taken by the 

Commission following the publication of this 

proposing release in the Federal Register. 

27 17 CFR 240.21F–4(d). 

28The Commission anticipates that this proposed 

rule change, if adopted, would apply to all new 

DPAs, NPAs, and Commission settlement 

agreements covered by the proposed rule that are 

entered into after the effective date of the rules. The 

proposed rule would not apply to any such 

agreements entered on or before the effective date 

of the rules. 

29 15 U.S.C. 78u–6(b)(1). A ‘‘covered judicial or 

administrative action’’ is any judicial or 

administrative action brought by the Commission 

under the securities laws that results in monetary 

sanctions exceeding $1 million. Id. 6(a)(1). A 

‘‘related action’’ is a judicial or administrative 

action brought by any of several authorities 

designated in the statute that is based upon the 

original information provided by a whistleblower 

that led to successful enforcement of a Commission 

covered action. Id. 6(a)(5). 

30 Id. 6(b)(1)(A)–(B). 

31 17 CFR 240.21F–4(d)(1). 

32See Securities Whistleblower Incentives and 

Protections, Exchange Act Release No. 64545, 76 FR 

34300, 34327 (June 13, 2011). Recognizing that an 

‘‘action’’ is generally considered to be a single 

captioned case or matter, the Commission adopted 

Rule 21F–4(d)(1) to clarify that it would treat two 

or more separate cases that arise out of the same 

nucleus of operative facts as a single ‘‘action’’ for 

purposes of making an award. In this way, the 

sanctions ordered in closely connected proceedings, 

even if individually under $1 million, are 

aggregated for purposes of assessing whether the 

actions reach the $1 million ‘‘covered action’’ 

threshold that is necessary to permit consideration 

of whistleblower award claims. The critical 

principle behind this rule is that a whistleblower 

should not be denied an award for his or her 

contributions to the closely connected cases or 

matters merely because the Commission (or other 

authority) determined not to bring these cases as 

one captioned law-enforcement case. 

33 In DOJ’s practice, DPAs and NPAs occupy an 

important middle ground between declining 

prosecution and obtaining the conviction of a 

corporation in circumstances where the collateral 

consequences of a corporate conviction for innocent 

third parties would be significant. See United States 

Attorneys’ Manual 9–28.200, 9–28.1100, available 

at https://www.justice.gov/usam/united-statesattorneys-manual. As one example, DPAs and NPAs 

Continued 

making an award determination. We are 

also proposing an amendment to Rule 

21F–13 19 to clarify the materials that 

may comprise the administrative record 

for purposes of judicial review. 

Two further changes are designed to 

help increase the Commission’s 

efficiency in processing whistleblower 

award applications. We are proposing to 

add paragraph (e) to Exchange Act Rule 

21F–8 20 to clarify the Commission’s 

ability to bar individuals from 

submitting whistleblower award 

applications where they are found to 

have submitted false information in 

violation of Exchange Act Section 

21F(i) 21 and Rule 8(c)(7) 22 thereunder, 

as well as to afford the Commission the 

ability to bar individuals who 

repeatedly make frivolous award claims 

in Commission actions. We are also 

proposing to add new Exchange Act 

Rule 21F–18 to afford the Commission 

with a summary disposition procedure 

for certain types of likely denials, such 

as untimely award applications and 

those applications that involve a tip that 

was not provided to the Commission in 

the form and manner that the 

Commission’s rules require. 

We are also proposing a technical 

correction to Exchange Act Rule 21F– 

4(c)(2) 23 to modify an erroneous 

internal cross-reference, as well as 

several technical modifications to 

Exchange Act Rules 21F–9, 10, 11, and 

12 24 to accommodate certain of the 

substantive and procedural changes 

described above. 

We have included two additional 

items beyond the proposed amendments 

to our rules. First, we are including 

proposed interpretive guidance to help 

clarify the meaning of ‘‘independent 

analysis’’ as that term is defined in 

Exchange Act Rule 21F–4 and utilized 

in the definition of ‘‘original 

information.’’ Second, we are including 

a general inquiry for public comment 

regarding whether the Commission in a 

future rulemaking could establish a 

potential discretionary award 

mechanism for Commission 

enforcement actions that either do not 

qualify as covered actions, are based on 

publicly available information (and not 

‘‘original information’’ as that term is 

defined in Exchange Act Rule 21F– 

4(b)(1)(i) 25), or where the monetary 

sanctions collected are de minimis.26

II. Discussion of Proposed Amendments 

The proposed amendments are set 

forth below. 

A. Proposed Amendment to Exchange 

Act Rule 21F–4(d) 27 Defining an 

‘‘action’’ 28

Section 21F of the Exchange Act 

authorizes us to pay whistleblower 

awards in relation to the ‘‘successful 

enforcement’’ of ‘‘covered judicial or 

administrative actions’’ brought by the 

Commission and certain ‘‘related 

actions’’ of other authorities, most 

notably DOJ.29 Awards range between 

10 percent and 30 percent ‘‘of what has 

been collected of the monetary 

sanctions imposed’’ in the action.30

Proposed Rule 21F–4(d)(3) would 

provide that, for purposes of making a 

whistleblower award, a DPA or NPA 

entered into by DOJ or a state attorney 

general in a criminal case would be 

deemed to be an ‘‘administrative action’’ 

and any money required to be paid 

thereunder would be deemed a 

‘‘monetary sanction.’’ The same result 

would follow for a settlement agreement 

entered into by the Commission outside 

of the context of a judicial or 

administrative proceeding to address 

violations of the securities laws. The 

premise of proposed Rule 21F–4(d)(3) is 

the same as that underlying current Rule 

21F–4(d)(1) 31: Our view that Congress 

did not intend for meritorious 

whistleblowers to be denied awards 

simply because of the procedural 

vehicle that the Commission (or the 

other authority) has selected to pursue 

an enforcement matter.32

Moreover, we also believe that the 

statutory term ‘‘administrative action’’ is 

sufficiently ambiguous and broad 

enough to permit us to interpret the 

term to include DPAs and NPAs when 

these instruments are employed by DOJ 

or a state attorney general, or settlement 

agreements entered into by the 

Commission outside of the context of 

judicial or administrative proceedings, 

as an appropriate resolution to a lawenforcement investigation.33 We find it 


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have been a prominent tool in DOJ’s criminal 

enforcement of the Foreign Corrupt Practices Act 

(‘‘FCPA’’), 15 U.S.C. 78dd–1 et seq., an area that 

overlaps with our own enforcement jurisdiction. In 

2017, DOJ entered into six DPAs or NPAs to resolve 

FCPA investigations of corporate entities, securing 

over $1.4 billion in monetary recoveries. See FCPA 

Related Enforcement Actions: 2017, available at 

https://www.justice.gov/criminal-fraud/case/ 

related-enforcement-actions/2017. 

34See, e.g., Exchange Act Sections 21F(h)(2)(A), 

15 U.S.C. 78u–6(h)(2)(A) (disclosure of 

whistleblower identities to a ‘‘respondent in 

connection with a public proceeding instituted by 

the Commission’’), 21B, 15 U.S.C. 78u–2 (‘‘Civil 

Remedies in Administrative Proceedings’’), 21C, 15 

U.S.C. 78u–3 (‘‘Cease-and-Desist Proceedings’’); 

Securities Act of 1933 Section 8A, 15 U.S.C. 77h– 

1 (‘‘Cease-and-Desist Proceedings’’); Investment 

Advisers Act Section 203(i), 15 U.S.C. 80b–3(i) 

(‘‘Money Penalties in Administrative Proceedings’’); 

Investment Company Act Section 9(d), 15 U.S.C. 

80a–9(d) (‘‘Money Penalties in Administrative 

Proceedings’’); see also SEC Rule of Practice 101(4), 

17 CFR 201.101(4) (defining ‘‘enforcement 

proceeding’’). 

35See generally DOJ Criminal Division and SEC 

Enforcement Division, A Resource Guide to the 

Foreign Corrupt Practices Act at 74 (2012), available 

at https://www.sec.gov/spotlight/fcpa/fcparesource-guide.pdf (‘‘FCPA Resource Guide’’) 

(describing function and operation of DPAs). 

36See United States v. Fokker, 818 F.3d 733, 737 

(D.C. Cir. 2016) (‘‘In certain situations, rather than 

choose between the opposing poles of pursuing a 

criminal conviction or forgoing any criminal 

charges altogether, the Executive may conclude that 

the public interest warrants the intermediate option 

of a deferred prosecution agreement.’’). 37Section 21F(j) of the Exchange Act, 15 U.S.C. 

78u–6(j), grants us ‘‘the authority to issue such rules 

and regulations as may be necessary or appropriate 

to implement’’ the whistleblower award program. 

Similarly, Section 23(a)(1) of the Exchange Act, 15 

U.S.C. 78w(a)(1), expressly provides the 

Commission the ‘‘power to make such rules and 

regulations as may be necessary or appropriate to 

implement the provisions’’ of the Exchange Act. In 

addition, we have broad definitional authority 

pursuant to Section 3(b) of the Exchange Act, 15 

U.S.C. 78c(b), which provides us with the ‘‘power 

by rules and regulations to define . . . terms used 

in [the Exchange Act].’’ 

38SEC Announces Initiative to Encourage 

Individuals and Companies to Cooperate and Assist 

Investigations, SEC Press Release 2010–6 (Jan. 13, 

2010). To date, we have entered into 17 settlements 

outside of judicial or administrate proceedings 

requiring payment of disgorgement, prejudgment 

interest, and penalties totaling more than $53 

million. 

39Our view on this issue would not be impacted 

by the revisions that we are proposing in the next 

section to the definition of ‘‘monetary sanctions.’’ 

40 15 U.S.C. 78u–6(b)(1). 

41 Id. (a)(4); 17 CFR 240.21F–4(e). 

42We believe that the agreements covered by this 

proposed rule impose monetary sanctions for 

purposes of Section 21F of the Exchange Act 

because they effectively compel or require monetary 

payments. For example, when the Commission has 

utilized certain agreements entered outside of 

particularly telling that Congress used 

the term ‘‘action’’ in Section 21F of the 

Exchange Act, rather than the term 

‘‘proceeding,’’ to describe the universe 

of administrative enforcement outcomes 

that might give rise to a whistleblower 

award. As used elsewhere in Section 

21F, as well as in other provisions of the 

securities laws and the Commission’s 

rules thereunder, the term ‘‘proceeding’’ 

refers to various specifically identified 

formal processes instituted before the 

Commission.34 Therefore, the use of the 

term ‘‘administrative action’’ in 

describing actions that can give rise to 

whistleblower awards suggests that 

Congress did not clearly intend to limit 

the scope of the Commission’s authority 

under Section 21F (outside of judicial 

actions) to only the Commission’s 

formal adjudicatory proceedings 

specified in the securities laws (or 

adjudicatory proceedings of designated 

related action authorities). 

The Commission has previously 

exercised its interpretive authority to 

pay a whistleblower award with respect 

to a DPA entered into by DOJ on the 

basis that such agreements are filed in 

a federal court action that charges the 

defendant with violations of law.35

However, as is further discussed below, 

DOJ’s practice with respect to NPAs has 

been not to commence an accompanying 

proceeding in either a judicial or 

administrative tribunal. Moreover, we 

have entered into settlement agreements 

outside of judicial or administrative 

proceedings. Notwithstanding this 

distinction in form (i.e., whether an 

accompanying judicial or administrative 

proceeding was undertaken), these 

agreements are all similar in important 

respects: Typically, they reward 

meaningful cooperation, are premised 

on significant remedial and compliance 

commitments, and obtain monetary 

remedies for past violations. Based on 

our experience with the whistleblower 

program, we are of the view that the 

entry of each of these types of 

agreements should be considered the 

successful enforcement of an 

administrative action within the 

meaning of Section 21F, and that 

whistleblowers who voluntarily provide 

original information that leads to such 

enforcement should not be 

disadvantaged because DOJ, a state 

attorney general in a criminal case, or 

the Commission, in the exercise of 

enforcement discretion, may elect to 

proceed in a form that does not include 

the filing of a complaint or indictment 

in federal (or state) court, or the 

institution of an administrative 

proceeding.36 For this reason, we are 

proposing Rule 21F–4(d)(3) to clarify 

that these agreements would be treated 

as ‘‘administrative actions’’ upon which 

whistleblower awards may be based 

(provided the total money required to be 

paid in the Commission action, 

including any other proceedings that 

arise out of the same nucleus of 

operative facts, exceed $1,000,000). 

In arriving at this preliminary 

interpretation, we have found several 

considerations to be persuasive. First, 

we believe that our rulemaking 

authority under the Exchange Act and 

our authority to define Exchange Act 

terms is best read as permitting us to 

incorporate such agreements within the 

definition of an ‘‘action.’’ 37 Second, as 

discussed above, we do not believe that 

Congress’s use of the phrase 

‘‘administrative action’’ in Section 21F 

limits us to considering whistleblower 

awards only when investigations are 

resolved through formal adjudicatory 

administrative proceedings. This is 

especially so given that such an 

approach would appear to draw 

arbitrary distinctions among otherwise 

meritorious whistleblowers based solely 

on the vehicle that we, DOJ, or a state 

criminal law authority, in the exercise 

of enforcement discretion, may view as 

the most appropriate in a particular 

case. Third, we are cognizant of the 

context in which Section 21F was 

enacted. Congress enacted the 

Commission’s whistleblower program in 

2010, which is the same year that the 

Commission initiated, as part of its 

enforcement cooperation program, 

forms of settlement agreements outside 

of the context of a judicial or 

administrative proceeding as an 

alternative mechanism to resolve 

securities law violations.38 Given that 

Commission actions are the primary 

focus of the whistleblower program, it is 

reasonable to understand that Congress 

may not have focused on the 

implications of such agreements when 

enacting Section 21F of the Exchange 

Act. 

For similar reasons, we believe that 

the payments required of a company 

under the terms of the agreements that 

would be covered by the proposed rule 

should be deemed to be ‘‘monetary 

sanctions’’ within the meaning of 

Section 21F of the Exchange Act.39

Section 21F(b)(1) authorizes us to pay 

meritorious whistleblowers between 10 

percent and 30 percent ‘‘of what has 

been collected of the monetary 

sanctions imposed in the action or 

related actions.’’ 40 ‘‘Monetary 

sanctions’’ are defined, in pertinent 

part, as money that are ‘‘ordered to be 

paid’’ as a result of a judicial or 

administrative action.41 Although the 

actions that would be covered by the 

proposed rule take the form of an 

agreement between a company and the 

Government, payment of disgorgement 

or other amounts is required of the 

company in order to resolve a 

Commission enforcement investigation 

or a DOJ criminal investigation without 

formal action by a court or agency.42


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judicial or administrative proceedings, the 

Commission has reserved the authority under the 

agreement to pursue an enforcement action if the 

individual or company fails to pay the monetary 

obligations. Enforcement Manual 6.2.2 (Nov. 28, 

2017), available at https://www.sec.gov/divisions/ 

enforce/enforcementmanual.pdf. When the 

Commission has utilized certain other settlement 

forms entered outside of judicial or administrative 

proceedings, the staff has to date retained its ability 

to recommend an enforcement action to the 

Commission against the individual or company. Id. 

at 6.2.3. DOJ DPAs and NPAs have similar 

mechanisms available to effectively require an 

individual or company to comply with the 

monetary obligations specified therein or face 

prosecution for the violations that are the subject 

of the agreement. See U.S. Gov’t Accountability 

Off., GAO–10–110, DOJ Has Taken Steps to Better 

Track Its Use of Deferred and Non-Prosecution 

Agreements, but Should Evaluate Effectiveness at 

11 (2009) (‘‘As part of DPAs and NPAs, companies 

are generally required to comply with a set of terms 

for a specified duration in exchange for prosecutors 

deferring the decision to prosecute or deciding not 

to prosecute,’’ including ‘‘monetary payments— 

such as restitution to victims of crime, forfeiture of 

the proceeds of the crime, and monetary penalties 

imposed by DOJ . . . .’’) (emphasis added). 

43We believe the statute and our current rules 

already authorize payment of a related action award 

in connection with a settlement reached pursuant 

to the Financial Industry Regulatory Authority’s 

Acceptance, Waiver, and Consent (‘‘AWC’’) process. 

An AWC is a form of FINRA disciplinary 

proceeding in which sanctions, including fines can 

be imposed on a member firm or associated person. 

See FINRA Rule 9216, available at http://

finra.complinet.com/en/display/display_

main.html?rbid=2403&element_id=3926. 

44 17 CFR 240.21F–11(b). 

45 In a rare case where a claimant could 

demonstrate that compliance with this proposed 

rule was impracticable because an agreement 

covered by it was not made available to the public 

before the passage of the claim deadline calculated 

under the rule, the Commission could consider 

exercising its authority to waive compliance with 

the rule. See Section 36(a) of the Exchange Act, 15 

U.S.C. 78mm(a), and Exchange Act Rule 21F–8(a), 

17 CFR 240.21F–8(a). 

46See United States Attorneys’ Manual 9–47.120 

available at https://www.justice.gov/usam/usam-9- 

47000-foreign-corrupt-practices-act-1977#9-47.120. 

47See 15 U.S.C. 78u–6(a)(1), (4) and (5) and 

(b)(1)(A)–(B). 

48 17 CFR 240.21F–11(b). 

49 17 CFR 240.21F–4(e). 

50The Commission anticipates that this proposed 

rule change, if adopted, would be utilized by the 

Commission after the effective date of the final rules 

in determining whether an action qualifies as a 

‘‘covered action’’ and in calculating any 

outstanding payments to be made to meritorious 

whistleblowers. 

51 15 U.S.C. 78u–6(a)(1). 

52See Exchange Act Rule 21F–10(a), 17 CFR 

240.21F–10(a). 

53 15 U.S.C. 78u–6(b)(1). 

54 15 U.S.C. 78u–6(a)(4). 

55We are not proposing to provide any additional 

clarification regarding subparagraph (B) as we 

believe that it does not create uncertainty as to the 

scope of the money that it covers. 

Accordingly, our view is that it is 

reasonable to treat the monetary 

components of the agreements that 

would be covered by the proposed rule 

as ‘‘monetary sanctions’’ that are 

‘‘imposed’’ within the meaning of 

Section 21F. Proposed Rule 21F–4(d)(3) 

thus would clarify that any money 

required to be paid under a DPA or NPA 

will be deemed a monetary sanction.43

Finally, we are proposing conforming 

amendments to Rule 21F–11(b) 44 to 

make clear that the time period for filing 

a claim for an agreement covered by this 

proposed rule would run from earliest 

public availability of the instrument 

reflecting the arrangement if evidenced 

by a press release or similar dated 

publication notice, or, absent such 

publication notice, the date of the last 

signature necessary for the agreement.45

Request for Comment 

1. Should DPAs and NPAs entered by 

DOJ or a state attorney general in a 

criminal case be treated as 

administrative actions, and the 

monetary payments obtained through 

these DPAs and NPAs treated as 

monetary sanctions, for purposes of 

making whistleblower awards? Should 

the same result follow for settlement 

agreements entered by the Commission 

to resolve securities law violations? 

Why or why not? 

2. Are there other types of 

arrangements (e.g., the use of 

declination letters in cases where the 

subject company pays all disgorgement, 

forfeiture amounts and/or restitution 

resulting from the misconduct at 

issue 46) that should be included in any 

rule the Commission adopts? How 

would any such arrangements satisfy 

the statutory requirements that they 

constitute a ‘‘judicial or administrative 

action brought by’’ the Commission or a 

related-action authority and that they 

include ‘‘monetary sanctions’’ (i.e., 

‘‘monies . . . ordered to be paid’’) that 

are ‘‘imposed’’ in the action? 47

3. Are there specific standards that we 

should apply in determining whether 

other vehicles for resolving 

investigations should be deemed to be 

administrative actions upon which 

whistleblower awards can be based? Is 

it sufficient that a resolution results in 

a monetary payment? 

4. As discussed above, we are 

proposing conforming amendments to 

Rule 21F–11(b) 48 to make clear that the 

time period for filing a claim for an 

agreement covered by this proposed rule 

would run from earliest public 

availability of the instrument reflecting 

the arrangement if evidenced by a press 

release or similar dated publication 

notice, or, absent such publication 

notice, the date of the last signature 

necessary for the agreement. Please 

comment on whether this conforming 

edit fully covers all potential 

agreements covered by proposed Rule 

21F–4(d)(3). If there are other types of 

arrangements that should be included, 

would any additional changes to this 

rule be necessary or appropriate? 

B. Proposed Amendment to Exchange 

Act Rule 21F–4(e) 49 Defining ‘‘monetary 

sanctions’’ 50

We propose to amend the definition 

of ‘‘monetary sanctions’’ to provide 

additional clarity concerning the class 

of payments that fall within the term’s 

scope. The proposed definition, which 

is based on the Commission’s 

experiences to date in administering the 

program, codifies the understanding of 

the term ‘‘monetary sanctions’’ that is 

already employed by the agency. 

Under Section 21F, the determination 

of what qualifies as a monetary sanction 

is important for two reasons. First, a 

Commission action qualifies as a 

‘‘covered action’’ for which a 

whistleblower award might be made 

only if the action ‘‘results in monetary 

sanctions exceeding $1,000,000.’’ 51

Whether a payment obligation is a 

‘‘monetary sanction’’ is thus a threshold 

question for the Commission in 

determining whether to post a Notice of 

Covered Action.52 Second, to the extent 

that one or more whistleblowers 

receives an award, award payments are 

calculated based upon the amount that 

‘‘has been collected of the monetary 

sanctions imposed in the action or 

related actions.’’ 53

Section 21F(a)(4) of the Exchange Act 

defines the term ‘‘monetary sanctions,’’ 

when used with respect to any judicial 

or administrative action, to mean: (A) 

Any monies, including penalties, 

disgorgement, and interest, ordered to 

be paid; and (B) any monies deposited 

into a disgorgement fund or other fund 

pursuant to section 308(b) of the 

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

7246(b)), as a result of such action or 

any settlement of such action.54

Exchange Act Rule 21F–4(e) is 

substantively identical. Based on our 

experience to date in administering the 

program, we believe that it would be 

beneficial to provide additional clarity 

regarding the scope of the potential 

payments that are encompassed within 

subparagraph (A) of the statutory 

definition.55

The language used in subparagraph 

(A) of Section 21F(a)(4), when read in 

isolation, could potentially be 

understood to direct that the 

Commission treat any order to pay 

money that is entered in a judicial or 

administrative action as a monetary 

sanction for purposes of the 

whistleblower award program. 

Interpreted in this way, monetary 


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56See 5 U.S.C. 504; 28 U.S.C. 2412. 

57 15 U.S.C. 78u–6(a)(1). 

58See generally Black’s Law Dictionary 1541 

(10th ed. 2014) (defining a ‘‘sanction’’ as ‘‘[a] 

penalty or coercive measure that results from a 

failure to comply with a law, rule, or order’’) 

(emphasis added). 

59 15 U.S.C. 78u–6(b)(1)(A) and (B). 

60See 15 U.S.C. 78u–6(b)(1). 

61Our use of the phrase ‘‘required payment’’ 

rather than ‘‘ordered’’ is intended to be consistent 

with proposed Rule 21F–4(d)(3), and recognizes 

that whistleblower tips may be important to 

successful enforcement actions that the agreements 

described in that proposed rule in which the 

Commission, DOJ, or a state attorney general in a 

criminal case require substantial monetary relief 

that is not, however, contained in a Commission 

order a court order, or an order issued by an 

administrative-law judge. See discussion of 

proposed Rule 21F–4(d)(3), supra. In our view, a 

payment that is required as part of such a resolution 

is reasonably treated as ‘‘ordered’’ when the agency 

has some mechanism to compel the payment either 

directly or indirectly. This could include, but does 

not necessarily require, the ability to obtain a court 

order requiring the payment. In the context of the 

agreements described in proposed Rule 21F–4(d)(3), 

the mechanism to compel the payment could 

include the ability either to revive an action or to 

bring an action if the signatory does not make the 

payments provided for in the agreement. 

62Where a receiver is appointed to gather assets 

for potential distribution to harmed investors, an 

award payment to a meritorious whistleblower 

would not need to await actual distribution of the 

receivership assets to the harmed investors. In our 

view, the statutory requirements that the monetary 

sanctions be both ‘‘ordered’’ and ‘‘collected’’ before 

a payment to a whistleblower can be made would 

typically be satisfied at the time a court approves 

the distribution to the harmed investors of assets 

within the receiver’s control. See Exchange Act 

section 21F(a)(4) (‘‘ordered’’) & 21F(b)(1) 

(‘‘collected’’), 15 U.S.C. 78u–6(a)(4), & 78u–6(b)(1). 

63Cf. S. Rep. 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 and recover money for 

victims of financial fraud.’’). 

sanctions would include, for example, 

orders to pay discovery sanctions, 

receivership fees and costs, taxes, and 

even attorney’s fees imposed under the 

Equal Access to Justice Act (‘‘EAJA’’).56

We believe, however, that other 

portions of Section 21F counsel in favor 

of a narrower understanding of which 

money ‘‘ordered to be paid’’ in an action 

should be treated as monetary sanctions 

for purposes of the whistleblower 

program. We find particularly relevant 

the definition of a ‘‘covered action’’ in 

Section 21F(a)(1),57 which provides that 

the Commission action must ‘‘result[ ] in 

monetary sanctions exceeding 

$1,000,000’’ in order for a whistleblower 

award to be considered. We believe that 

the phrase ‘‘results in’’ suggests that 

Congress was addressing those 

monetary obligations that the action 

secures ‘‘as relief’’ for the violations that 

are the subject of the Commission’s 

enforcement action.58 Similarly, we 

believe that the phrase ‘‘monetary 

sanctions imposed in the action’’ in 

Section 21F(b)(1) 59 indicates that the 

congressional focus was on monetary 

obligations that are in the nature of 

relief for the violations. So, for example, 

while in normal parlance a person 

might say that civil penalties were 

‘‘imposed’’ as a result of a securities-law 

violation, we do not believe that one 

would say that a court order approving 

a court-appointed receiver’s request for 

fees or costs ‘‘impos[ed]’’ a monetary 

sanction. 

Finally, we find support for our 

proposed approach in the purpose of 

Section 21F to reward whistleblowers 

for their contributions to the ‘‘successful 

enforcement’’ of Commission actions 

and related actions,60 and in the 

common-sense understanding that relief 

against wrongdoers is perhaps the 

essential measure of an action’s success. 

Given this context, we believe that the 

term ‘‘monetary sanctions’’ is better 

understood to mean those requirements 

to pay money that the Commission or a 

related-action authority obtain ‘‘as 

relief’’ in the underlying action. 

Based on the language within Section 

21F, therefore, we believe that the 

language in subparagraph (A) of the 

statutory definition is better understood 

to encompass only those required 

payments in a Commission action or 

related action that are designed as relief 

for the violations successfully resolved 

in the action. Accordingly, we propose 

to amend Exchange Act Rule 21F–4(e) to 

provide that the term ‘‘monetary 

sanctions’’ means: (1) A required 

payment that results from a Commission 

action or related action and which is 

either (i) expressly designated as 

disgorgement, a penalty, or interest 

thereon, or (ii) otherwise required as 

relief for the violations that are the 

subject of the covered action or related 

action; or (2) 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 such action or 

any settlement of such action.61

We believe that paragraph (e)(1)(i) of 

the proposed definition should 

generally be straightforward to apply. 

This part of the rule encompasses any 

payment requirement that is expressly 

designated as disgorgement, a penalty, 

or interest thereon. That money paid by 

a wrongdoer in satisfaction of a 

disgorgement or penalty obligation may 

thereafter be used to pay costs of a 

receiver, trustee, or fund administrator 

would not change the analysis under 

this part of the proposed rule. Because 

the wrongdoer was ordered to pay such 

money pursuant to a disgorgement or 

penalty obligation, paragraph (e)(1)(i) 

would be satisfied. 

With respect to paragraph (e)(1)(ii), 

only requirements to pay money as 

relief for the underlying violations 

would qualify. Thus, for example, if a 

court orders an asset freeze and 

appoints a receiver in a Commission 

enforcement action, and, without 

separately entering a disgorgement 

order, the court subsequently issues an 

order approving the receiver’s plan to 

distribute money to injured investors, 

we would treat that second order as a 

monetary sanction under paragraph 

(e)(1)(ii) of the proposed rule.62

However, if the receiver requests 

approval to use frozen funds to pay 

creditors, taxes to a governmental 

authority, attorney’s fees, or other costs 

of the receivership, such payments 

would not qualify ‘‘as relief’’ obtained 

because of the successful enforcement 

action and would not constitute 

monetary sanctions under paragraph 

(e)(1)(ii). 

In proposing the amended rule 

language, we have also considered the 

legislative purpose underlying 

whistleblower award provisions 

generally. In our view, these types of 

award programs are intended to allow a 

whistleblower to receive a percentage of 

the monetary relief that the government 

is able to obtain as remedies for the 

violations that are the subject of the 

action to which the whistleblower’s 

information led. The approach outlined 

above would comport with this 

understanding of how whistleblower 

award programs generally operate.63 We 

have also considered the fact that a 

broader approach could lead to 

potentially irrational results such as the 

Commission paying whistleblowers a 

share of any discovery sanctions or 

EAJA fees imposed on the government, 

even though such monetary sanctions 

would have no connection to the 

information the whistleblower provided 

that led to the enforcement action and 

that contributed to the success of that 

action. 

Request for Comment 

5. Should ‘‘monetary sanctions’’ be 

defined as those obligations to pay 

money that are obtained ‘‘as relief’’ for 

the violations that are charged in a 

Commission enforcement action or a 

related action? Why or why not? 

6. Are there additional classes of 

monetary requirements or payment 

obligations (beyond those discussed 

above) that may be ordered in an action 

covered by the Commission’s 

whistleblower award program that the 


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64 17 CFR 240.21F–3(b)(1). 

65The Commission anticipates this proposed rule 

change, if adopted, would apply only to coveredaction and related action award applications that 

are connected to a Notice of Covered Action (see 

Exchange Act Rule 21F–10(a), 17 CFR 240.21F– 

10(a)) posted on or after effective date of the final 

rules. 

66 15 U.S.C. 78u–6(b). 

67 17 CFR 240.21F–11. 

68 15 U.S.C. 78u–6(a)(5). 

69 17 CFR 240.21F–3(b)(1). 

70 17 CFR 240.21F–4(g). 

71 17 CFR 240.21F–4(h). 

72 In 2011, Utah established a whistlebloweraward scheme to provide rewards of up to 30 

percent of the money collected in state securitieslaw enforcement actions. Utah Code Annotated 61– 

1–101 et seq. The following year, Indiana enacted 

a whistleblower award scheme to provide rewards 

up to 10 percent of the monies collected in a state 

securities-law enforcement action. Indiana Code 

23–19–7–1 et seq. 

73 26 U.S.C. 7623. 74 49 U.S.C. 30172 (enacted by Section 24352 of 

the Fixing America’s Surface Transportation Act of 

2015 (FAST Act), Pub. L. 114–94). 75Notably, the Utah whistleblower-award 

program (see note 72, supra) provides that a person 

may not receive an award thereunder if he or she 

‘‘qualifies for an award as described in Section 21F 

of the Securities Exchange Act, 15 U.S.C. Sec. 78u– 

6, and regulations issued under that section.’’ We 

assume that this provision is intended to prevent 

a double recovery on a Utah criminal-enforcement 

action brought by the State’s Attorney General that 

could potentially be covered by both the 

Commission’s whistleblower program and the Utah 

program. 

76This sentence of proposed paragraph (b)(4) is 

modeled after existing Rule 21F–3(b)(3), 17 CFR 

240.21F–3(b)(3), which is discussed further below. 

Commission should specifically 

consider or address in clarifying the 

definition of ‘‘monetary sanctions’’? 

C. Proposed Amendment to Exchange 

Act Rule 21F–3(b)(1) 64 Defining ‘‘related 

action’’ 65

Under Exchange Act Section 21F(b) 66

and Rule 21F–11,67 any whistleblower 

who obtains an award based on a 

Commission enforcement action may be 

eligible for an award based on monetary 

sanctions that are collected in a related 

action. Exchange Act Section 

21F(a)(5) 68 and Rule 21F–3(b)(1) 69

provide that a related action is a judicial 

or administrative action that is both: (i) 

Brought by DOJ, an appropriate 

regulatory authority (as defined in Rule 

21F–4(g)),70 a self-regulatory 

organization (as defined in Rule 21F– 

4(h) 71), or a state attorney general in a 

criminal case; and (ii) based on the same 

original information that the 

whistleblower voluntarily provided to 

the Commission and that led to the 

successful enforcement of the 

Commission action. 

The proposed amendment adding 

paragraph (b)(4) to Rule 21F–3 would 

apply in situations where both the 

Commission’s whistleblower program 

and a second, separate whistleblower 

award scheme have potential 

application to the same action. During 

the implementation and administration 

of our whistleblower program, it has 

become increasingly apparent to us that 

additional, separate whistleblower 

award schemes might apply to an action 

that could otherwise qualify as a related 

action. In this regard we note that, since 

the adoption of our whistleblower 

program rules, two states have adopted 

their own whistleblower award 

programs in connection with state 

securities-law enforcement actions.72

We are also aware that DOJ might 

pursue law-enforcement actions that 

potentially implicate both the 

Commission’s whistleblower program 

and the whistleblower award program 

that the Internal Revenue Service 

(‘‘IRS’’) administers.73 Further, Congress 

in 2015 established a new motorvehicle-safety whistleblower award 

program that allows employees or 

contractors of a motor-vehicle 

manufacturer, parts supplier, or 

dealership who report serious violations 

of federal vehicle-safety laws to obtain 

an award of 10 percent to 30 percent of 

any monetary sanction over $1 million 

that the Federal Government recovers 

based on that information.74 To date, the 

Commission has never paid an award on 

a matter where a second whistleblower 

program also potentially applied to the 

same matter, nor has the Commission 

ever indicated that it would do so. 

Proposed paragraph (b)(4) would 

expressly authorize two mechanisms for 

the Commission to use in situations 

where at least one other award scheme 

might also apply. First, the first sentence 

of proposed paragraph (b)(4) would 

provide that, notwithstanding the 

definition of related action in Rule 21F– 

3(b)(1), if a judicial or administrative 

action is subject to a separate monetary 

award program established by the 

Federal Government, a state 

government, or a self-regulatory 

organization, the Commission will deem 

the action a related action only if the 

Commission finds (based on the unique 

facts and circumstances of the action) 

that its whistleblower program has the 

more direct or relevant connection to 

the action.75 In analyzing this question, 

the Commission will consider whether 

Congress (or a state) has enacted a 

specific whistleblower program that 

appears to apply directly to the case at 

hand; if so, we will generally determine 

that Congress reasonably would not 

have intended our more general, 

secondary ‘‘related action’’ award 

mechanism to sweep in the case. In 

reaching this determinination, we 

would look to the complaint in the 

action, the overall monetary sanctions 

recovered (e.g., are they principally tied 

to a different whistleblower program for 

which Congress provided an award 

mechanism), and the court’s final order 

to assess which award program has the 

closer relationship to the overall case. 

We might also consult the agency 

involved with that other case to obtain 

its overall assessment of whether the 

action is in fact one that is primarily 

tied to violations for which Congress (or 

the states) have established a more 

specifically applicable whistleblower 

program and for which our general, 

‘‘related action’’ award mechanism 

should not apply. Critically, this 

standard would not yield a clear 

brightline but would turn on the 

particular facts and circumstances of the 

case at hand and the Commission would 

explain the grounds for its conclusion in 

any final order. 

Second, the second sentence of 

proposed paragraph (b)(4) provides that 

even if the Commission determines to 

deem the action a related action, the 

Commission will not make an award to 

you for the related action if you have 

already been granted an award by the 

authority responsible for administering 

the other whistleblower award program; 

further, if you were denied an award by 

the other award program, you will not 

be permitted to readjudicate any issues 

before the Commission that the 

authority responsible for administering 

the other whistleblower award program 

resolved against you as part of the 

award denial.76 The proposed rule 

provides that, if the Commission makes 

an award before an award determination 

is finalized by the authority responsible 

for administering the other award 

scheme, the Commission would 

condition its award on the meritorious 

whistleblower making a prompt, 

irrevocable waiver of any claim to an 

award from the other award scheme. 

The proposed rule also provides that, 

in determining whether a potential 

related action has a more direct or 

relevant connection to the 

Commission’s whistleblower program 

than another award program, the 

Commission would consider the nature, 

scope, and impact of the misconduct 

charged in the purported related action, 

and its relationship to the federal 

securities laws. This inquiry would 

include consideration of, among other 

things: (i) The relative extent to which 

the misconduct charged in the potential 

related action implicates the public 

policy interests underlying the federal 

securities laws (e.g., investor protection) 

versus other law-enforcement or 


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77To the extent that a state adopts a 

whistleblower award program relating directly to 

securities law violations, we would generally 

anticipate the Commission would find that the state 

award scheme should apply over the Commission’s 

award program. However, to the extent that the 

particular state criminal action may implicate an 

award scheme that is not directed at securities-law 

violations (such as a state-award scheme focused on 

consumer protection), the Commission might 

conclude that our whistleblower program should 

not apply based on an assessment of the particular 

facts and circumstances of the state action. 

78By contrast, to the extent that a DOJ 

enforcement action centers on insider-trading 

violations that are based on the same misconduct 

that was the subject of the Commission’s covered 

action, and that most of the monetary sanctions 

arise from the insider-trading violations, the 

Commission would likely treat the matter as a 

related action notwithstanding any potential 

restitution ordered due to any tax violations 

included within the case. 

79Section 23(a)(1) of the Exchange Act, 15 U.S.C. 

78w(a)(1), expressly provides the Commission the 

‘‘power to make such rules and regulations as may 

be necessary or appropriate to implement the 

provisions’’ of the Exchange Act, and has long been 

understood to provide the Commission with broad 

authority to issue rules and regulations carrying the 

force of law. Similarly, Section 21F(j), 15 U.S.C. 

78u–6(j), grants us ‘‘the authority to issue such rules 

and regulations as may be necessary or appropriate 

to implement’’ the whistleblower award program. In 

addition, we have broad definitional authority 

pursuant to Section 3(b) of the Exchange Act, 15 

U.S.C. 78c(b), which provides us with the ‘‘power 

by rules and regulations to define . . . terms used 

in [the Exchange Act].’’ 

80 15 U.S.C. 78u–6(b)(1)(B). 

81See, e.g., 7 U.S.C. 26 (providing under the 

CFTC’s whistleblower program for awards of ‘‘not 

more than 30 percent, in total, of what has been 

collected of the monetary sanctions imposed in the 

action or related actions’’); 26 U.S.C. 7623(b)(1) 

(providing under the IRS administered 

whistleblower award program for ‘‘an award . . . 

not more than 30 percent of the collected proceeds 

(including penalties, interest, additions to tax, and 

additional amounts)’’); 31 U.S.C. 3730 (providing in 

a False Claims Action that a qui tam plaintiff shall 

receive ‘‘not more than 30 percent of the proceeds 

of the action or settlement’’). Our preliminary 

analysis indicates that Congress’s determination not 

to go above a 30-percent ceiling for awards appears 

to comport with a similar determination by those 

states that have adopted their own false claims acts 

and securities-law whistleblower programs. 

82See generally S. Rep. No. 111–176 at 110–12 

(2010). 

83See generally Radzanower v. Touche Ross & 

Co., 426 U.S. 148, 153 (1976) (‘‘It is a basic 

principle of statutory construction that a statute 

dealing with a narrow, precise, and specific subject 

is not submerged by a later enacted statute covering 

a more generalized spectrum.’’); Anthony Scalia & 

Bryan A. Garner, Reading Law: The Interpretation 

of Legal Texts (2012) at 183 (noting that a 

specifically applicable statutory provision should 

govern a more general provision because ‘‘the 

specific provision comes closer to addressing the 

very problem posed by the case at hand and is thus 

more deserving of credence’’); id. at 184 (explaining 

that ‘‘the general/specific canon [of statutory 

construction] does not meant that the existence of 

a contradictory specific provision voids the general 

provision[,]’’ but rather that ‘‘its application to cases 

covered by the specific provision is suspended’’). 

84 Mova Pharmaceutical Corp. v. Shalala, 140 

F.3d 1060, 1068 (D.C. Cir. 1998) (‘‘If a literal 

construction of the words of a statute be absurd, the 

act must be so construed as to avoid the 

absurdity.’’); see also United States v. X–Citement 

Video, Inc., 513 U.S. 64, 68–69 (1994) (rejecting the 

‘‘most natural grammatical reading’’ of a statute to 

avoid ‘‘absurd’’ results). 

regulatory interests (e.g., tax collection 

or fraud against the Federal 

Government); (ii) the degree to which 

the monetary sanctions imposed in the 

potential related action are attributable 

to conduct that also underlies the 

federal securities law violations that 

were the subject of the Commission’s 

enforcement action; and (iii) whether 

the potential related action involves 

state-law claims and the extent to which 

the state may have a whistleblower 

award scheme that potentially applies to 

that type of law-enforcement action.77

Thus, for example, if an action by DOJ 

charges a scheme to avoid tax 

obligations and imposes monetary 

sanctions, we would expect that such an 

action would lack a more direct or 

relevant connection to the 

Commission’s whistleblower program 

relative to the IRS’s award program.78

As a second example, where a state 

whistleblower award program is 

available to award a whistleblower 

whose tip leads to state criminal charges 

in connection with a fraudulent 

securities offering, we anticipate that 

the Commission would not view such 

an action as a related action under the 

test in proposed paragraph (b)(4). In this 

circumstance, the state program would 

be the more direct or relevant program 

and the appropriate avenue for the 

whistleblower to seek an award. 

In proposing paragraph (b)(4), we 

acknowledge that, on its face, Exchange 

Act Section 21F does not exclude from 

the definition of related actions those 

judicial or administrative actions that 

have a less direct or relevant connection 

to our whistleblower program than 

another whistleblower scheme. We 

nonetheless perceive ambiguity when 

considering this language in the context 

of the overall statutory scheme. We 

believe that an understanding focused 

exclusively on the statutory definition 

of related action would produce a result 

that Congress neither contemplated nor 

intended. We believe that our 

rulemaking authority under the 

Exchange Act and our authority to 

define Exchange Act terms permit us to 

reach this interpretation.79 We base this 

determination on several 

considerations. 

First, when Congress established the 

Commission’s whistleblower program, it 

set a firm ceiling on the maximum 

amount that should be awarded for any 

particular action—‘‘not more than 30 

percent, in total, of what has been 

collected of the monetary sanctions 

imposed’’ in the action.80 Indeed, it 

appears that in establishing federal 

whistleblower award programs in the 

modern era Congress has determined 

that an award of more than thirty 

percent on any particular action is not 

necessary or appropriate.81 Yet if both 

the Commission’s whistleblower 

program and another whistleblower 

award scheme were to apply to the same 

action, this would create the potential 

for a total award exceeding the 30- 

percent ceiling due to a dual recovery. 

Second, the purpose of the related 

action award component of the 

Commission’s whistleblower program 

was to allow meritorious whistleblowers 

the opportunity to obtain additional 

financial awards for the ancillary 

recoveries that may result from the same 

original information that the 

whistleblowers gave to the Commission. 

In this way, the potential for a related 

action recovery can further enhance the 

incentives for an individual to come 

forward to the Commission. But neither 

the text of Section 21F, nor the relevant 

legislative history 82 suggests that 

Congress considered the unusual 

situation in which there may be a 

separate whistleblower award scheme 

that has a more direct or relevant 

connection to the judicial or 

administrative action,83 and that would 

therefore be providing a financial 

incentive to encourage individuals to 

report misconduct without the need for 

the incentive effect produced by the 

related-action component of the 

Commission’s award program. 

Third, we believe that permitting 

potential whistleblowers to recover 

under both our award program and a 

separate award scheme for the same 

action would produce the irrational 

result of encouraging multiple ‘‘bites at 

the apple’’ in adjudicating claims for the 

same action and potentially allowing 

multiple recoveries.84 In the adopting 

release that accompanied the original 

whistleblower rules, the Commission 

recognized the irrational result that 

would flow from allowing a 

whistleblower to have multiple separate 

opportunities to adjudicate his or her 

contributions to a case and to 

potentially obtain multiple separate 

rewards on that same enforcement 

action. Further, the Commission barred 

this result from occurring in the specific 

contexts that the Commission 

considered at the time it adopted the 

whistleblower program rules. 

Specifically, the Commission adopted 

Rule 21F–3(b)(3), which provides that 

the Commission will not pay on a 

related action if the whistleblower 

program administered by the 

Commodity Futures Trading 


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85 76 FR 34300, 34305/3. 

86 Id. n.52 (‘‘[W]e do not believe Congress 

intended Section 21F of the Exchange Act to permit 

additional recovery for the same action above what 

it specified in the False Claims Act.’’). 

87Scalia & Garner, supra note 33, at 235, 239 

(emphasis in original). 

88See Rules 21F–3(b)(2), 17 CFR 240.21F–3(b)(2), 

and 21F–4(c)(1)–(3), 17 CFR 240.21F–4(c)(1)–(3). 

89Section 21F provides express authority for the 

Commission to share information that may identify 

a whistleblower with other authorities that may, in 

turn, bring related actions. See 15 U.S.C. 78u– 

6(a)(5) and (h)(2)(D)(i). 

90 17 CFR 240.21F–11(c). 

91 15 U.S.C. 78u–6(a)(5). 

92The ‘‘based upon’’ language in Exchange Act 

section 21F(a)(5), 15 U.S.C. 78u–6(a)(5) is separate 

and distinct from the requirement that the 

whistleblower’s original information must have 

‘‘led to’’ the success of the other entity’s action, see 

Exchange Act section 21F(b)(1), 15 U.S.C. 78u– 

6(b)(1); see also Exchange Act Rule 21F–4(c), 17 

CFR 240.21F–4(c). Even if a whistleblower satisfies 

the ‘‘based upon’’ standard because his information 

was directly provided to the other entity by the 

whistleblower or the Commission, and used in 

some fashion by that entity, this does not mean the 

whistleblower’s information necessarily ‘‘led to’’ 

the success of that action. 

93 17 CFR 240.21F–3(b)(2). Rule 21F–3(b)(2) 

contemplates that ‘‘the Commission may seek 

confirmation of the relevant facts regarding the 

whistleblower’s assistance from the authority that 

brought the related action,’’ and we will deny a 

related action award where sufficient and reliable 

information cannot be obtained from the other 

authority. 76 FR 34300, 34305/1. These 

requirements would be rendered null if the ‘‘based 

upon’’ requirement could be satisfied without the 

other authority actually receiving and utilizing the 

whistleblower’s original information. 

94 15 U.S.C. 78u–6(a)(6). 

Commission (‘‘CFTC’’) has issued an 

award for the same action, nor will the 

Commission allow a whistleblower to 

readjudicate any issues decided against 

the whistleblower as part of the CFTC’s 

award denial. In adopting that rule, the 

Commission made clear its view that a 

whistleblower should neither have two 

recoveries on the same action nor 

multiple bites at the adjudicatory 

apple.85 Relatedly, the Commission 

explained in the adopting release that it 

would for similar reasons not make an 

award to a whistleblower who was also 

a qui tam plaintiff under the False 

Claims Act.86 Although at the time of 

the original rulemaking for the 

whistleblower program the Commission 

did not expressly consider the potential 

for multiple separate awards due to the 

existence of any other award schemes 

(such as the whistleblower program 

administered by the IRS), the principles 

underlying Rule 21F–3(b)(3) appear 

similarly relevant to that circumstance. 

To illustrate the significance of our 

existing rule and the rule that we are 

proposing, consider a future DOJ 

enforcement action involving 

predominately tax claims that results 

from the same original information that 

a Commission whistleblower shared 

with both the Commission and the 

CFTC. In this scenario, it is entirely 

possible based purely on the words of 

the relevant statutes that the SEC and 

the CFTC could each have to pay up to 

30 percent on the DOJ action, and that 

the IRS could have to pay an additional 

30 percent; the Commission 

whistleblower could thus take home an 

amount that is equal to as much as 90 

percent of the money collected for the 

violations in the DOJ action. In our 

view, this is an ‘‘obviously unintended’’ 

outcome that would ‘‘make[ ] no 

substantive sense,’’ 87 and the rule that 

we already have in place and the rule 

that we are proposing would prevent it 

and similar duplicative payments from 

multiple whistleblower programs. 

In addition to the foregoing, we are 

also proposing two amendments to the 

definition of ‘‘related action’’ in Rule 

21F–3(b)(1). First, the proposed 

amendment would add clarity to the 

existing requirement that, to potentially 

obtain an award for a related action, a 

whistleblower must have provided to 

the other entity (or the Commission 

must have shared with the other entity) 

the same original information that the 

whistleblower provided to the 

Commission and that led to the 

successful enforcement of the 

Commission action.88 We think that 

where the Commission staff determines 

to share the whistleblower’s information 

with the other entity, it is consistent 

with the purposes of the program to 

allow an award even if the 

whistleblower did not directly step 

forward to that agency.89

This new language to the definition of 

‘‘related action’’ merely clarifies what is 

already required by Exchange Act Rule 

21F–11(c),90 which provides in relevant 

part that a whistleblower must 

‘‘demonstrate [that the whistleblower] 

directly (or through the Commission) 

voluntarily provided the governmental 

agency, regulatory authority or selfregulatory organization the same 

original information that led to the 

Commission’s successful covered 

action[.]’’ Further, we believe that this 

interpretation is consistent with the 

requirement in Section 21F(a)(5) of the 

Exchange Act 91 that a related action 

must be ‘‘based upon the original 

information provided by a 

whistleblower.’’ To be ‘‘based upon’’ the 

whistleblower’s original information, in 

our view, the same information that the 

whistleblower provided to the 

Commission must have been provided 

to the other authority and that 

information must have itself directly 

contributed to the other authority’s 

investigative or litigation efforts leading 

to the success of that authority’s 

enforcement action. In practice, this can 

occur either because the whistleblower 

provided the original information to the 

other authority, or because the 

Commission through its information 

sharing mechanisms provided the 

original information to the other 

authority, and in either case the 

authority utilized that information 

directly in its own investigation and/or 

its resulting enforcement action. 

We note that, under our existing 

interpretation of the ‘‘based upon’’ 

language in Section 21F(a)(5) and the 

clarifying rule that we are proposing, 

the other authority’s enforcement action 

would not be a related action in 

circumstances where the other 

authority’s enforcement action was in 

some manner ‘‘based upon’’ the results 

or findings of the Commission’s 

enforcement action without the other 

authority ever actually receiving and 

utilizing the whistleblower’s original 

information. Rather, in this situation the 

whistleblower’s original information 

could, at best, be described as a 

derivative factor potentially 

contributing to the success of the other 

authority’s action, and we deem this too 

attenuated a causal connection to meet 

the ‘‘based upon’’ standard, which in 

our view requires actual reliance on the 

whistleblower’s original information by 

the other entity.92 Indeed, in these 

circumstances any claim for an award 

would fail under Rule 21F–3(b)(2), 

which unambiguously requires that the 

success of a related action be based 

upon ‘‘the same original information 

that the whistleblower gave to the 

Commission’’ as a predicate to the 

Commission authorizing a related action 

award.93

Second, we are making a technical 

modification to the definition of 

‘‘related action’’ in Rule 21F–3(b)(1) that 

would make clear that the existing 

clause ‘‘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,’’ applies to all related 

actions and not just criminal actions 

brought by a state attorney general. This 

technical modification would conform 

the definition in the rule to the 

substantive requirements of the 

statutory definition as set forth in 

Section 21F(a)(6) of the Exchange Act.94

Request for Comment 

7. Is the proposed ‘‘direct or relevant’’ 

standard appropriate for assessing 

whether an action should qualify as a 


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95Exchange Act Rule 21F–3(b)(3) provides that 

the Commission will not make an award to an 

individual for a related action if the individual has 

already been granted an award by the CFTC for the 

same action pursuant to its whistleblower program 

under Section 23 of the Commodity Exchange Act 

(7 U.S.C. 26). Similarly, if the CFTC has previously 

denied an award to an individual in a related 

action, the individual will be precluded from 

relitigating any issues before the Commission that 

the CFTC resolved against the individual as part of 

an award. 

96The Commission anticipates this proposed rule 

change, if adopted, would apply only to coveredaction and related-action award applications that 

are connected to a Notice of Covered Action (see 

Exchange Act Rule 21F–10(a), 17 CFR 240.21F– 

10(a)) posted on or after effective date of the final 

rules. 

97 17 CFR 240.21F–6. 98 76 FR 34300, 34331/2. 

99We believe that proposed paragraph (c) would 

in many respects work similar to proposed 

paragraph (d), as discussed further below; this 

would include, for example, how we would 

determine whether the $2 million threshold is met 

in cases involving joint whistleblowers. To the 

extent that either proposed paragraph (c) or 

proposed paragraph (d) is triggered by a potential 

award, it would open up discretion for the 

Commission to assess the award factors in Exchange 

Act Rules 21F–6(a)–(b), 17 CFR 240.21F–6(a)–(b), in 

terms of dollar amounts, not merely in terms of 

award percentages. This would give the 

Commission, for example, the authority to boost a 

20 percent award upwards based on a reassessment 

of the positive factors relative to the actual dollar 

amounts at issue in the particular award. Thus, 

even if the whistleblower might otherwise receive 

a 20 percent award on a small case (for example, 

one with collections of $100,000), the Commission 

could reassess the whistleblower’s contributions in 

dollar terms and determine to enhance the award 

upwards (potentially up to the 30 percent 

maximum, which in the particular example would 

yield a payout of $30,000). The Commission could 

do so if it determines that this enhancement in 

dollar terms would better acknowledge the 

whistleblower’s contribution and better help 

incentivize similarly situated future 

whistleblowers. Further, in assessing whether the 

$2 million threshold has been, or likely will be 

satisfied, the Commission will consider collectively 

the total award amounts from all the Commission 

and related actions that were the result of the 

whistleblower’s original information. 

100 17 CFR 240.21F–6(d). 

related action? Are there alternative 

formulations that should be adopted 

instead? 

8. Instead of adopting the proposed 

rule, which would authorize the 

Commission on a case-by-case basis to 

consider whether an action should 

qualify as a related action, should the 

Commission adopt a categorical 

exclusion from the definition of related 

action for any judicial or administrative 

action that may have an alternative 

applicable award scheme? 

9. As part of this rulemaking, we are 

considering whether to repeal Exchange 

Act Rule 21F–3(b)(3), 17 CFR 240.21F– 

3(b)(3),95 so that proposed Rule 21F– 

3(b)(4) would also apply to potential 

related actions that might produce a 

double recovery with the CFTC’s 

whistleblower program. Existing Rule 

21F–3(b)(3) applies somewhat 

differently than our proposed Rule 21F– 

3(b)(4), as it does not provide the 

Commission express authority to 

determine whether a potential related 

action is more closely connected with 

the SEC’s whistleblower program or the 

CFTC’s whistleblower program. Should 

we repeal existing Exchange Act Rule 

21F–3(b)(3) so that proposed Rule 21F– 

3(b)(4) would apply instead to afford a 

uniform treatment for all potential 

related actions for which multiple 

whistleblower programs might apply? 

Please explain. 

D. Proposed Amendment to Exchange 

Act Rule 21F–6 Regarding Awards to a 

Single Whistleblower Below $2 Million 

or in Cases Yielding at Least $100 

Million in Collected Monetary 

Sanctions 96 and Guidance on the 

Meaning of ‘‘Unreasonable Delay’’ 

Under Rule 21F–6. 

Rule 21F–6 97 establishes the 

analytical framework that the 

Commission follows both in setting the 

appropriate percentage amount of an 

award in connection with a particular 

Commission or related action and in 

determining an individual percentage 

award for each whistleblower where the 

Commission makes awards to more than 

one whistleblower in connection with 

the same action. In the adopting release 

accompanying the promulgation of the 

whistleblower program rules, the 

Commission explained that Rule 21F–6 

‘‘provides general principles without 

mandating a particular result’’ and ‘‘the 

determination of the appropriate 

percentage of a whistleblower award 

will involve a highly individualized 

review of the facts and circumstances 

surrounding each award using the 

analytical framework set forth’’ in the 

rule.98

Rule 21F–6 identifies four criteria that 

may increase an award percentage and 

three criteria that may decrease a 

whistleblower’s award percentage. As 

provided in Rule 21F–6(a), the criteria 

that may increase an award percentage 

are: (1) Significance of the information 

provided by the whistleblower; (2) 

assistance provided by the 

whistleblower; (3) law-enforcement 

interest in making a whistleblower 

award; and (4) participation by the 

whistleblower in internal compliance 

systems. As provided in Rule 21F–6(b), 

the criteria that may decrease an award 

percentage are: (1) Culpability of the 

whistleblower; (2) unreasonable 

reporting delay by the whistleblower; 

and (3) interference with internal 

compliance and reporting systems by 

the whistleblower. 

Proposed paragraph (c) would add to 

Rule 21F–6’s existing analytical 

framework by providing a mechanism 

for the Commission to adjust upwards 

any awards that would potentially be 

below $2 million to a single 

whistleblower. Specifically, proposed 

Rule 21F–6(c) would provide that, if the 

resulting award after applying the award 

factors specified in paragraphs (a) and 

(b) would yield a potential payout to a 

single whistleblower below $2 million 

(or any such greater amount that the 

Commission may periodically establish 

through publication of an order in the 

Federal Register), the Commission may 

adjust the award upward so that the 

likely total award payout to the 

whistleblower reflects a dollar amount 

that the Commission determines is 

appropriate to achieve the program’s 

objectives of rewarding meritorious 

whistleblowers and sufficiently 

incentivizing future whistleblowers who 

might otherwise be concerned about the 

low dollar amount of a potential award; 

provided that in no event shall this 

provision be utilized to raise a potential 

award payout (as assessed by the 

Commission at the time it makes the 

award determination) above $2 million 

(or by such other amount as the 

Commission may designate by order) or 

will the total amount awarded to all 

whistleblowers in the aggregate be 

greater than 30 percent. 

We believe that proposed paragraph 

(c) could provide an important new tool 

for the Commission to ensure that even 

in cases where the collected monetary 

sanctions may be relatively small (and 

award amounts correspondingly 

modest), whistleblowers could receive 

an appropriate award for their efforts in 

coming forward to the Commission. We 

also anticipate that, where the proposed 

rule is triggered, there would be a 

presumption in favor of some award 

enhancement, though the precise 

amount of the enhancement may vary 

from case to case depending on the 

unique facts and circumstances at issue. 

In this way, we believe proposed 

paragraph (c) could provide an 

important additional incentive for 

potential whistleblowers to come 

forward.99

We note that the new authority 

proposed in paragraph (c) would come 

with important limitations. Specifically, 

the Commission will not adjust an 

award upward under the proposed 

provision if any of the negative award 

factors that are identified in Exchange 

Act Rule 21F–6(b) 100—and which are 

specified above—were found to be 

present with respect to the 

whistleblower’s award claim, or if the 


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101 17 CFR 240.21F–16. 102For example, if the collected amount is $150 

million, the Commission could exercise its 

discretion to reduce a potential payout of 25% 

($37.5 million), but the Commission could not 

reduce the award below $30 million. In another 

example, if the collected amount is $400 million, 

the Commission could exercise its discretion to 

reduce a potential payout of 25% ($100 million), 

but the Commission could not reduce the award 

below 10% ($40 million). Finally, if the collected 

amount is $150 million and the potential payout is 

18% ($27 million), then the Commission could not 

reduce that award because it already is below the 

$30 million floor. 

103See SEC Litigation Release No. 20829 (dated 

Dec. 15, 2008) (discussing the settlement reached 

SEC v. Siemens Aktiengellschaft, Civ. Action No. 

08–CV–02167 (D.D.C.)). 

104See DOJ Press Release entitled ‘‘Siemens AG 

and Three Subsidiaries Plead Guilty to FCPA 

Violations and Agree to Pay $450 Million in 

Combined Criminal Fines’’ (dated Dec. 15, 2008) 

(available at: www.justice.gov/archive/opa/pr/2008/ 

December/08-crm-1105.html). 

105The statutory framework that Section 21F 

establishes appears to permit—and at a minimum 

does not expressly prohibit—the Commission from 

considering the dollar amount of a potential award. 

Indeed, the language in Section 21F refers to the 

‘‘amount of the award,’’ which appears to afford the 

Commission discretion to set the awards based on 

a consideration of the appropriate dollar amount 

that should be paid (provided that this dollar 

amount is between 10 percent and 30 percent of the 

collected monetary sanctions). Notwithstanding the 

Continued 

award claim triggers Exchange Act Rule 

21F–16 (concerning awards to 

whistleblowers who engage in culpable 

conduct).101 Thus, for example, if a 

whistleblower whose award claim might 

otherwise be eligible for an 

enhancement under this provision were 

found by the Commission to have 

unreasonably delayed reporting to the 

Commission under Exchange Act Rule 

21F–6(b)(2), then the Commission could 

not increase his or her award under this 

provision. 

In addition, we are proposing a new 

paragraph (d) that would add to Rule 

21F–6’s existing analytical framework 

by providing a mechanism for the 

Commission to conduct an enhanced 

review of awards in situations where a 

whistleblower has provided information 

that led to the success of one or more 

covered or related actions that, 

collectively, result in at least $100 

million in collected monetary sanctions. 

As we explain below, under proposed 

paragraph (d), the Commission, first, 

would consider the dollar amount of an 

award at given percentage levels in 

determining whether and how to adjust 

the award based on the positive and 

negative factors in paragraphs (a) and (b) 

of this section; and second, the 

Commission could determine that an 

exceedingly large potential payout 

resulting from the assessment under 

paragraphs (a) and (b) was not 

reasonably necessary to fulfill the 

purposes of the program and thus 

exercise its discretion to reduce the 

award to an appropriate amount. The 

Commission’s ability to reduce an 

award under this provision would be 

subject to two significant limitations. 

First, in no event could the Commission 

reduce the total payout for any award(s) 

resulting from the whistleblower’s 

original information below $30 million. 

Second, the Commission could not 

reduce the award for any specific action 

such that the total amount paid to all 

whistleblowers for that action would go 

below the 10 percent minimum 

statutory floor of collected monetary 

sanctions in that action.102

An important principle underlying 

proposed paragraph (d) is that, as the 

dollar value of an award amount grows 

exceedingly large, there is a significant 

potential for a diminishing marginal 

benefit to the program in terms of 

compensating the whistleblower and 

incentivizing future whistleblowers. In 

these situations, we believe that it is in 

the public interest that we scrutinize the 

dollar impact of these awards more 

carefully in considering award 

enhancements and reductions under the 

existing award criteria of paragraphs (a) 

and (b) of this section and, further, 

where appropriate, adjust an award 

downward so that the dollar amount of 

the payout is more in line with the 

program’s goals of rewarding 

whistleblowers and incentivizing future 

whistleblowers from a cost-benefit 

perspective (again, subject to the $30 

million floor for any whistleblower 

subject to a reduction under this 

provision and the 10 percent statutory 

minimum referenced above). 

As an illustration of a potential 

situation to which proposed paragraph 

(d) might be utilized, consider the 

settlements that the Commission and 

DOJ entered with Siemens AG in 2008. 

The total monetary sanctions collected 

in these two actions was $800 million 

(the Commission received $350 million 

in disgorgement of profits 103 and DOJ 

received $450 million in criminal 

penalties 104). Suppose that these two 

actions occurred today and that these 

actions were based on original 

information voluntarily provided to the 

Commission by an eligible 

whistleblower. In such a situation, the 

Commission would be required to pay 

an award to that whistleblower of 

between $80 million (a 10 percent 

award) and $240 million (a 30 percent 

award) for the two actions. Critically, 

under the existing framework of Rule 

21F–6—without proposed paragraph 

(d)—the Commission in setting the 

appropriate amount of an award would 

be unable to consider the 

extraordinarily large dollar amounts that 

would be associated with any 

assessments and adjustments made 

when applying the existing award 

factors of Rule 21F–6; the Commission 

would also lack the authority to adjust 

the award amount downward if it found 

that amount unnecessarily large for 

purposes of achieving the whistleblower 

program’s goals. So if the hypothetical 

meritorious whistleblower were an 

individual who did everything right in 

connection with his or her 

whistleblowing (that is, he or she were 

the model whistleblower), the 

Commission would almost certainly be 

obligated to pay this individual an 

award at or near the maximum $240 

million level under the existing rules. 

What paragraph (d) would do, as we 

explain below, is to afford the 

Commission the discretion to determine 

whether such an extraordinarily large 

payout is actually necessary to further 

the whistleblower program’s goals of 

rewarding whistleblowers and 

incentivizing future whistleblowers, and 

if not, proposed paragraph (d) would 

afford the Commission the ability to 

adjust the actual payout to an award 

amount that is closer to the $80 million 

minimum that would be required to be 

paid pursuant to Section 21F(b). We 

believe that adopting paragraph (d) to 

afford us a discretionary mechanism to 

make such common-sense adjustments 

to extraordinarily large awards to ensure 

that they do not exceed an amount that 

is appropriate to achieve the goals and 

interests of the program is, to put it 

simply, good public policy. 

Turning to the text of proposed 

paragraph (d), this new provision would 

do two important things that should 

help us ensure that any large awards are 

in fact aligned with the program’s goals 

and not unnecessarily large to achieve 

the program’s goals. First, proposed 

paragraph (d)(1) would permit the 

Commission to consider the potential 

dollar amount of the payout to a 

whistleblower resulting from his or her 

original information (in any 

Commission actions or related actions, 

collectively) when applying each of the 

existing award criteria; when the 

potential amount of an award payout 

could be in the range of 10 to 30 percent 

of at least $100 million, we believe it is 

reasonable and appropriate to consider 

the adjustments that we make for each 

award factor in dollar terms rather than 

to apply exclusively a percentage 

assessment that does not take into 

account what those percentage 

adjustments would translate to in actual 

dollars paid to the whistleblower.105


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statutory language, the Commission’s existing rules 

do not expressly authorize the Commission to 

consider the dollar amount of a potential award 

when setting the award percentage. Proposed 

paragraph (d) would make it clear that the 

Commission may consider the dollar amount of a 

potential award when setting the award percentage 

where at least $100 million in monetary sanctions 

has been collected. 

106Notably, this authority to make a downward 

adjustment would be available only if the resulting 

payout after applying the existing award factors 

would be at least $30 million (or such greater 

alternative amount that the Commission may 

periodically establish through publication of an 

order in the Federal Register). 

107 In assessing whether the $100 million 

threshold has been crossed to invoke proposed 

paragraph (d), we preliminarily anticipate 

considering not just the likely payout in any 

Commission covered actions that resulted from the 

whistleblower’s information, but also any potential 

payout that might result from any related actions 

that resulted from the whistleblower’s information. 

Thus, for example, if a Commission covered action 

and a related action brought by the Department of 

Justice, and a related action brought by an 

appropriate regulatory authority, collectively, 

resulted in the collection of at least $100 million 

in monetary sanctions based on a whistleblower’s 

original information, then proposed paragraph (d) 

would be triggered. We would then decide whether 

one or more of the awards should be adjusted 

downward to yield a total payout that complies 

with the terms of the proposed rule. Further, we 

note that in the context of a joint whistleblower, for 

purposes of applying the proposed rule, we would 

treat them collectively as one whistleblower in 

applying proposed paragraph (d), including in 

assessing whether the $100 million threshold is 

satisfied; however, in determining whether and to 

what extent to make a downward adjustment, we 

would expect to consider the need to appropriately 

incentivize individuals even when acting jointly to 

come forward and report to the Commission. 

108These totals are through April 2018 and treat 

as single awards several cases where 

whistleblowers’ original information led to multiple 

covered actions that were processed together in one 

award Order recognizing the total contributions of 

the whistleblower. Similarly, consistent with the 

approach proposed above governing cases where we 

grant an award for both a Commission enforcement 

action and a related action by another agency based 

on the same information provided by the 

whistleblower (see 17 CFR 240.21F–3(b)), we 

consider covered-action awards together with their 

corresponding related action awards as single 

whistleblower awards. 

109One of the awards that exceeded $30 million 

was issued in September 2014 for more than $30 

million in a Commission action and related actions. 

See Order Determining Whistleblower Award Claim, 

Exchange Act Release No. 34–73174 (Sept. 22, 

2014), available at https://www.sec.gov/rules/other/ 

2014/34-73174.pdf. Two other awards were issued 

in March 2018 for $49 and $33 million, 

respectively, to three individuals (two of whom 

were acting as joint whistleblowers) in a single 

covered action. See Order Determining 

Whistleblower Award Claim, Exchange Act Release 

No. 34–82897 (March 19, 2018), available at https:// 

www.sec.gov/rules/other/2018/34-82897.pdf. 

110See Claire M. Sylvia, The False Claims Act: 

Fraud Against the Government section 8.4 (updated 

June 2018) (citing DOJ Relator’s Guidelines, 

reprinted in 11 False Claims Act and Qui Tam Q. 

Rev. 17 (Oct. 1997); see also U.S. ex rel. Simmons 

v. Samsung Electronics Am., Inc., 116 F. Supp. 3d 

575, 580–81 (quoting and applying the DOJ award 

guidelines). 

111See, e.g., WorldCom, Inc. v. FCC, 238 F.3d 449, 

462 (D.C. Cir. 2001) (citation omitted) (explaining 

that ‘‘[a]n agency has ‘wide discretion’ in making 

line-drawing decisions and ‘[t]he relevant question 

is whether the agency’s numbers are within a zone 

of reasonableness’ ’’); see also, e.g., National 

Shooting Sports Foundation, Inc. v. Jones, 716 F.3d 

200, 214, (D.C. Cir. 2013) (citation omitted) (‘‘An 

agency ‘is not required to identify the optimal 

threshold with pinpoint precision. It is only 

required to identify the standard and explain its 

relationship to the underlying regulatory 

concerns.’’). 

This would allow us to consider the 

relative (or marginal) value of the actual 

dollar amounts associated with any 

enhancements that we are considering 

under the positive award factors. We 

think that this is particularly important 

where the percentage enhancements are 

corresponding with particularly large 

dollar enhancements because, to the 

extent that individuals are motivated to 

come forward based on a potential 

award, it is the total dollar payout that 

would be relevant to them. Allowing us 

to assess each enhancement or 

reduction in dollar terms should permit 

us to more realistically and concretely 

assess the appropriate amount that is 

reasonably necessary to recognize a 

whistleblower’s contributions in cases 

involving large potential awards. 

Second, proposed paragraph (d)(2) 

would permit the Commission to adjust 

the award downward if, after 

consideration of the existing award 

factors in paragraphs (a) and (b) of this 

section, the Commission finds that the 

potential award amount (from any 

Commission actions and related actions, 

collectively) exceeds what is reasonably 

necessary to reward the whistleblower 

and to incentivize similarly situated 

whistleblowers.106 Importantly, 

proposed paragraph (d)(2) would not 

mandate that the Commission make a 

downward adjustment. Further, 

proposed paragraph (d)(2) would make 

clear that any adjustment to a 

whistleblower’s award under that 

paragraph shall not yield a potential 

award payout (as assessed by the 

Commission at the time that it makes 

the award determination) below $30 

million, nor may any downward 

adjustment result in the total amount 

awarded to all the meritorious 

whistleblowers, collectively, for each 

covered or related action constituting 

less than 10 percent of the monetary 

sanctions collected in that action. 

Critically, the $30 million reference in 

proposed rule (d)(2) would not be a 

ceiling on awards, and we do not intend 

that it would be applied as such. Rather, 

$30 million for a potential payout is the 

floor below which we would not lower 

any award that is subject to a reduction 

under the proposed rule. Further, the 

proposed amendment would be 

triggered only in situations where a 

whistleblower (including two or more 

individuals who acted together as a joint 

whistleblower) provides information 

that leads to the success of one or more 

covered actions and related actions that 

results in at least $100 million in 

collected monetary sanctions.107 In the 

nearly seven years of experience that we 

have had in implementing and 

administering the whistleblower 

program, we have issued final orders 

granting 50 whistleblower awards to 55 

individuals (including, as explained 

above, individuals who acted as joint 

whistleblowers).108 To date, only two 

Commission covered actions and related 

actions have crossed the threshold of 

collecting at least $100 million in 

monetary sanctions and for which the 

payout exceeded our proposed $30 

million floor.109 Those two actions 

taken alone involved the payment of 

$112 million to four individuals. 

We believe that the $100 million 

collected-monetary-sanctions threshold 

reflects the appropriate level at or above 

which it would be reasonable for the 

Commission to consider whether the 

likely award payout from the collected 

monetary sanctions will exceed an 

amount that is appropriate to achieve 

the program’s goals. For matters 

involving collected sanctions at or 

above the $100 million threshold, we 

think the potential for a whistleblower 

award to exceed the amount necessary 

to achieve the program’s goals exists 

and that awards based on $100 million 

or more are sufficiently large to warrant 

heightened scrutiny under the rule that 

we are proposing. Our proposed 

approach in triggering proposed 

paragraph (d) based on the amount of 

monetary sanctions collected is not 

unlike the approach that the DOJ 

utilizes (and which some courts also 

utilize) in the context of the False 

Claims Act (‘‘FCA’’) when determining 

the appropriate amount of an award to 

a relator. Specifically, DOJ has 

developed a series of guidelines to 

determine the appropriate size of an 

award, and one consideration that may 

lead to a downward adjustment is 

whether the ‘‘FCA recovery was 

relatively large.’’ 110

We similarly believe that the $30 

million floor is appropriate. In our view, 

there is a potential that as the payout to 

a whistleblower grows beyond the $30 

million floor, the marginal benefit of 

each additional dollar paid may 

decrease to such an extent that, in terms 

of furthering the program’s overall goals, 

the payout may be more than is 

reasonably necessary. In our judgment 

$30 million represents a reasonable line 

at which to draw the floor.111 In this 


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112 In 2016, approximately 0.5 percent of the U.S. 

population had a net worth of $16.12 million while 

0.1 percent of the U.S. population had a net worth 

of $43.1 million. See https://dqydj.com/net-worthbrackets-wealth-brackets-one-percent/. 

113The economic analysis, infra Part VII, 

discusses various potential annual incomes that a 

meritorious whistleblower might obtain from 

investing a $30 million award payout in various 

types of annuities. We note that, to the extent that 

certain whistleblowers may experience significant 

harmful consequences, such as large financial 

sacrifices or career-ending ramifications, as a result 

of their whistleblowing activities, the proposed rule 

(should it be triggered by the potential payout) 

would allow the Commission the flexibility to 

consider these particular facts and circumstances to 

determine an appropriate award level. Proposed 

paragraph (d) would allow the Commission similar 

flexibility in situations involving multiple 

individuals acting as a joint whistleblower. 

114See 15 U.S.C. 78u–6(d) (anonymity); id. 78u– 

6(h)(1) (employment retaliation protection); id. 

78u–6(h)(2) (confidentiality protections); see also 

17 CFR 240.21F–9(c) and 240.21F–10(c). 

115See Exchange Act section 21F(g), 15 U.S.C. 

78u–6(g). 

116See, e.g., SEC Division of Enforcement Annual 

Report for 2017 (Nov. 15, 2017), available at https:// 

www.sec.gov/files/enforcement-annual-report2017.pdf. 

117At the end of 2010, the IPF had just under 

$452 million in it, with no awards having yet been 

made. See Annual Report on the Dodd-Frank 

Whistleblower Program, Fiscal Year 2011, at 8 

(available at: https://www.sec.gov/files/ 

whistleblower-annual-report-2011.pdf), and by the 

end of fiscal year 2017, the IPF had approximately 

$322 million in it. Thus, from the end of 2010 until 

the end of fiscal year 2017, approximately $130 

million in awards were paid out. The $83 million 

awards that were just paid for a single enforcement 

action were approximately equal to 64% of the sum 

of all of the other awards that the Commission had 

paid up through fiscal year 2017. 

118See 15 U.S.C. 78u–6(g)(3). 

regard, we note that utilizing 2016 data 

on net worth, an individual who 

received just the $30 million floor—even 

allowing for a reduction due to taxes— 

would find himself or herself in the 

range of the the top 99.5 percentile to 

99.9 percentile of the U.S. population by 

net worth.112 Further, the analysis 

conducted in Part VII(B)(5) 

demonstrates for us that even this sum 

(again, allowing for a reduction due to 

taxes) if modestly invested should 

produce a reasonable lifetime income 

stream for most potential 

whistleblowers. We thus believe it is 

appropriate and reasonable to afford the 

agency a mechanism to more closely 

scrutinize awards that exceed this floor 

to determine whether and to what 

extent they are necessary to reward the 

whistleblower or incentivize similarly 

situated whistleblowers. 

While we believe that the $30 million 

floor should reflect an amount that in 

most cases would be an extremely 

attractive inducement for company 

insiders across many industries to come 

forward to report securities-law 

violations, we recognize that future 

experience in the years ahead could 

suggest that some adjustment is 

appropriate.113 Accordingly, to the 

extent that our experience with the 

program in future years may suggest that 

an adjustment to the floor is 

appropriate, we propose to establish a 

mechanism by which the Commission 

may publicly notice an order 

announcing such an increase by 

publishing it in the Federal Register. 

In considering the appropriateness of 

the $30 million floor below which we 

could not make a downward departure 

for any payouts stemming from a 

whistleblower’s original information, 

we also note that the monetary incentive 

may often be an important reason a 

whistleblower comes forward, but it is 

typically not the only reason in our 

experience to date. In this regard, we 

note that the monetary incentive is one 

component in a package of reporting 

incentives made available under Section 

21F, which includes employment 

retaliation protections and 

confidentiality requirements (including, 

critically, the ability of whistleblowers 

to remain anonymous through the 

course of an investigation and resulting 

enforcement action).114 Indeed, our 

experience to date has been that 

approximately one-half of the 

whistleblowers who have received 

awards for information regarding their 

current or former employers took 

advantage of the opportunity to submit 

their tips to the Commission 

anonymously; the ability to report 

anonymously is an additional attractive 

feature of our program that helps to 

encourage company insiders and others 

to come forward by lessening their fear 

of potential exposure. 

In advancing proposed paragraph (d), 

we are mindful of our own 

responsibility to investors and the 

general public to ensure that the 

Investor Protection Fund (IPF) that 

Congress established to fund awards is 

used efficiently and effectively to 

achieve the program’s objectives.115 We 

recognize that the Commission has 

obtained significant monetary 

judgments against parties in 

enforcement actions in recent years. 

Several individual matters involved 

orders in excess of $300 million in 

monetary sanctions in FY–2016 and 

FY–2017.116 If there were an eligible 

whistleblower in one of these matters, 

and assuming the Commission collected 

the amounts ordered, an exceedingly 

large whistleblower award, beyond what 

we believe was intended when the 

program was established, could result. 

Multiple such awards would, in turn, 

cause the funds in the IPF to be 

diminished. As of the end May 2018, 

the balance of the IPF for the first time 

fell below the $300 million threshold 

that triggers the statutory replenishment 

mechanism; this occurred when the 

Commission paid $83 million—its 

largest payout to date on an enforcement 

action—to three individuals.117

Whenever the reserve in the IPF falls 

below $300 million, Section 21F(g)(3) 

requires the Commission to replenish 

the IPF.118 These funds otherwise 

would be directed to the Treasury, 

where they could be made available for 

use in funding other valuable public 

programs. 

In light of the foregoing, we believe 

that, where a whistleblower’s original 

information leads to Commission or 

related actions that, collectively, involve 

at least $100 million in collected 

monetary sanctions, it is consistent with 

the interests of investors and the 

broader public interest that the 

Commission have a mechanism to 

ensure that the payout does not exceed 

an amount beyond what is reasonably 

necessary to achieve the program’s goals 

and, to the extent that it is, to adjust the 

award percentage so that it better aligns 

with those goals. In our view, proposed 

paragraph (d) would provide such a 

mechanism if adopted. 

We generally anticipate that the 

Commission’s application of proposed 

paragraph (d) would be based on the 

unique facts and circumstances of each 

award matter. We believe that in 

determining whether a payout exceeds 

what is appropriate to achieve the 

program’s objectives, the Commission 

would carefully assess the potential 

payout in relation to both any unusually 

detrimental circumstances that impact 

the whistleblower and the level of 

financial incentive that may be 

necessary to encourage future similarly 

situated whistleblowers to come 

forward. Facts that would be relevant to 

determining whether the large payout 

may be appropriate given the specific 

whistleblower’s circumstances include, 

for example, whether the whistleblower 

made an extraordinary and highly 

unusual sacrifice by coming forward 

(such as placing himself or herself in 

legal jeopardy to bring the Commission 

information that it would otherwise not 

have been able to obtain or 

demonstrably suffering career-ending 

consequences commensurate with the 

potential large award). In a situation 

involving two or more individuals 

acting as a joint whistleblower, we 

would consider the need to 

appropriately incentivize individuals 

even when acting jointly to come 

forward and report to the Commission. 


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119According to the Office of the Whistleblower, 

of the 55 individuals who have received awards, 

approximately 10 percent were high-ranking 

corporate executives at companies of varying sizes. 

Each whistleblower award determination is based 

on the facts and circumstances of the case, 

including the monetary sanctions collected. Based 

on this subset of prior cases, a large majority of 

these executives received awards that were under 

$5 million. 

120We would generally contemplate using 

publicly available data on compensation levels in 

making this determination. Award applicants could 

submit information as part of their award 

application to the extent that they are concerned 

that the proposed rule might be implicated by their 

application. 

121The existence of any of these facts would not 

foreclose the Commission from finding that any 

large payout that exceeded the $30 million floor in 

proposed rule 21F–6(d) was nonetheless not 

reasonably necessary to achieve the program’s goals 

and to thus reduce the award to an appropriate 

amount. Conversely, the absence of special 

circumstances or extraordinary sacrifices does not 

mean that the Commission would in all cases 

determine to reduce the amount of the award. 

122 15 U.S.C. 78u–6(c)(1)(B)(ii). 

123 76 FR 34300, 34356/2. 

124Exchange Act section 21F(c)(1)(B)(iv); 15 

U.S.C. 78u–6(c)(1)(B)(iv). 

125 137 S. Ct. 1635 (2017) (providing that the 

Commission must bring any enforcement action 

seeking to obtain disgorgement within five years of 

the date the violation occurred). 

126 568 U.S. 442 (2013) (providing that the 

Commission must bring any enforcement action 

seeking to obtain civil penalties within five years 

of the date the violation occurred). 

127 17 CFR 240.21F–6(b)(2). 

Facts that would be relevant to 

determining whether the large payout is 

necessary and appropriate to encourage 

future similarly situated whistleblowers 

to come forward include the industry in 

which knowledgeable whistleblowers 

might work, the type of position held by 

that whistleblower,119 and the 

compensation levels within that 

industry,120 and whether potential 

whistleblowers may be located overseas 

and the likely compensation levels in 

those countries (to the extent 

available).121

In making any downward adjustment 

to a large award, the Commission would 

retain discretion to determine the 

appropriate award amount and 

proposed paragraph (d) is not intended 

to mandate any specific reduction or 

one-size-fits-all result. Nonetheless, we 

anticipate that in those cases where 

proposed paragraph (d) is triggered and 

the Commission determines that a 

downward adjustment is warranted, the 

extent to which the Commission 

exercises its authority to decrease such 

awards would vary along a sliding scale 

that corresponds with the overall size of 

the potential award in dollar terms. For 

example, we generally anticipate that 

the nature and magnitude of any 

decrease applied to an award in the 

$35–40 million range would typically be 

less than the magnitude of the decrease 

applied to an award in the $100–$150 

million range. In our view, this slidingscale approach would make sense 

because the larger the dollar amount of 

a payout away from the $30 million 

floor, the greater the likelihood of 

diminishing marginal benefits to the 

program from each additional dollar 

paid to the whistleblower. In no event, 

however, would the Commission 

decrease an award below the $30 

million floor (or whatever future floor 

the Commission might establish by 

order) using the authority afforded to 

the Commission pursuant to the 

proposed rule. 

We preliminarily contemplate that 

proposed paragraph (d) would be 

applied in any instance where the 

Commission determines to process two 

or more separate covered actions 

together in the same final order, 

provided that both actions involve the 

same information submitted by the 

whistleblower. We would similarly 

expect that the Commission could apply 

this rule if, after having made an award 

to a whistleblower, the Commission 

subsequently processes an award 

application for that whistleblower 

(either in connection with a second 

covered action or a related action) and 

the subsequent award application is 

based on the same general information 

from the whistleblower as the earlier 

award determination. 

We do not believe that the proposed 

rule conflicts with the statutory 

directive in Section 21F(c)(1)(B)(ii) 122

that ‘‘[i]n determining the amount of an 

award,’’ the Commission ‘‘shall not take 

into consideration the balance of the 

[IPF].’’ This statutory provision prevents 

the Commission from adjusting an 

individual award based on the 

availability of money in the IPF. 

Critically, proposed paragraph (d) 

would not permit the Commission to 

consider the balance of the IPF when 

determining whether an award should 

be reduced. Rather, as noted above, 

paragraph (d) would only authorize the 

Commission to consider whether a 

potential award payout exceeds an 

amount that is reasonably necessary to 

achieve the program’s goals. In this way, 

proposed paragraph (d) would provide a 

mechanism for the Commission to 

ensure that it is granting awards in an 

efficient and effective manner that 

serves the ‘‘twin goals of protecting 

investors and increasing public 

confidence in the markets’’ 123 and our 

adoption of this proposed rule would be 

within our authority to adopt 

‘‘additional relevant [award] factors.’’ 124

To make this clear, we are adding a 

provision to proposed pararagraph (d) 

stating that the Commission shall not 

take into account the balance of the IPF 

in determining whether to make a 

downward adjustment under the 

proposed paragraph or in making any 

other award determinations under 

Exchange Act Rule 21F–6. 

Finally, the proposed rule would 

provide certain standards for the 

Commission to consider in determining 

whether to issue an order that adjusts 

the $2 million award threshold, the 

$100 million threshold, and the $30 

million award(s) floor under proposed 

paragraphs (c) or (d), respectively. 

Specifically, the proposed rule would 

state that in issuing such an order ‘‘the 

Commission shall consider (among 

other factors that it deems relevant) 

whether the adjustment is necessary or 

appropriate to encourage 

whistleblowers to come forward and the 

potential impact the adjustments might 

have on the Investor Protection Fund.’’ 

* * * * * 

Guidance regarding the meaning of 

‘‘unreasonable delay’’ in existing Rule 

21F–6(b)(2) and proposed Rule 21F–6(c). 

In proposing the foregoing 

modifications to the criteria that govern 

award determinations, we believe it is 

appropriate to provide guidance on our 

approach regarding ‘‘unreasonable 

delay’’ as relates to an award 

determinations. We believe that any 

delay in reporting to the Commission 

beyond 180 days is presumptively 

unreasonable. In light of the Supreme 

Court’s recent decisions in Kokesh v. 

SEC125 and Gabelli v. SEC,126 delay on 

the part of a whistleblower can have a 

debilitating impact on the Commission’s 

ability to make a full recovery of illgotten gains and to obtain civil penalties 

and, in this way, delay may impair our 

ability to return funds to investors who 

have been harmed by the wrongdoing. 

Further, although this 180-day 

presumption is not expressly codified in 

either Exchange Rule 21F–6(b)(2),127

which deals with ‘‘unreasonable 

delays,’’ or the rule that we are 

proposing, we would typically expect to 

treat any delay exceeding this period as 

unreasonable for purposes of both rules 

going forward. That said, in assessing 

unreasonable delay under both the 

existing rule and the proposed rule, we 

would still consider any highly unusual 

facts and circumstances of a particular 

award application in assessing 

unreasonable delay, such that the 

general presumption of ‘‘unreasonable 

delay’’ might be overcome in certain 

rare instances. Finally, we caution that 


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shorter periods of delay (i.e., less than 

180 days) may also readily qualify as 

unreasonable depending on the 

particular facts and circumstances at 

issue, including, for example, whether 

the violations were ongoing, whether 

investors continued to experience harm 

or the whistleblower continued to profit 

from the wrongdoing during the period 

of the whistleblower’s delay or whether 

the delay had a discernable impact on 

the monetary sanctions that were 

ordered in the enforcement action. Put 

simply, a whistleblower who delays 

reporting to the Commission should 

expect that his or her ‘‘reward’’ for 

reporting might well be negatively 

impacted. 

Request for Comment 

10. With respect to proposed 

paragraph (c), is it appropriate to 

consider increasing smaller awards and 

would doing so help to further 

incentivize insiders and others to come 

forward with tips? If so, is the $2 

million ceiling for invoking the rule 

appropriate or is it either too high or too 

low? Please explain. 

11. With respect to proposed 

paragraph (c), should the enhancement 

authority be unavailable in the situation 

where a whistleblower’s award was 

reduced under Rule 21F–6(b) or Rule 

21F–16? Please explain. 

12. Would the proposed amendments 

to paragraph (d) of Rule 21F–6 

appropriately balance the Commission’s 

various programmatic interests, in 

particular encouraging company 

insiders and others to come forward 

while also ensuring that awards are not 

unnecessarily large beyond an amount 

that is sufficient to compensate 

whistleblowers and achieve the 

Commission’s law-enforcement 

interests? If not, is there an alternative 

formulation of the proposed rule that 

the Commission should adopt to guard 

against payouts that are in excess of 

amounts that are reasonably necessary 

to further the Commission’s goals? 

13. With respect to proposed 

paragraph (d), are the $100 million 

collected sanctions threshold and the 

$30 million floor appropriate? Is there 

another threshold or floor that the 

Commission should adopt? If so, please 

explain what should be the appropriate 

threshold or floor. 

14. In considering whether to make a 

downward adjustment to a potential 

award under proposed paragraph (d), is 

it reasonable for the Commission to 

consider the likely amount of the award 

in relation to the whistleblower 

program’s goals of rewarding 

meritorious whistleblowers and 

sufficiently incentivizing future 

similarly situated whistleblowers? 

a. In the release, we explain that facts 

that would be relevant to determining 

whether the large payout may be 

appropriate given the specific 

whistleblower’s circumstances include, 

for example, whether the whistleblower 

made an extraordinary and highly 

unusual sacrifice by coming forward 

(such as placing himself or herself in 

legal jeopardy to bring the Commission 

information that it would otherwise not 

have been able to obtain or 

demonstrably suffering career-ending 

consequences commensurate with the 

potential large award). Are there other 

(or additional) considerations that the 

Commission should assess in making 

that determination? 

b. Also in the release, we explain that 

facts that would be relevant to 

determining whether the large payout is 

needed and appropriate to encourage 

future similarly situated whistleblowers 

to come forward include the industry in 

which knowledgeable whistleblowers 

might work, the type of position held by 

that whistleblower, and the 

compensation levels within that 

industry, and whether potential 

whistleblowers may be located overseas 

and the likely compensation levels in 

those countries (to the extent available). 

Are there other (or additional) 

considerations that the Commission 

should assess in making that 

determination? 

15. In the context of two or more 

individuals acting together as a 

whistleblower, should the $30 million 

floor in proposed paragraph (d) apply 

where the aggregate award to both 

individuals exceeds $30 million or 

where the award to each individual 

would potentially exceed $30 million? 

Please explain the reasons for your 

views. 

16. In determining whether the $100 

million threshold has been met for 

application for the proposed rule, 

should the Commission consider not 

just the likely payout in any 

Commission covered action that results 

from the original information that the 

whistleblower provided to the 

Commission, but also any potential 

payout that might result from any 

related actions? Why or why not? 

17. As discussed above, the 

Commission could apply proposed 

paragraph (d) if, after having made an 

award to a whistleblower, the 

Commission subsequently processes an 

award application for that 

whistleblower (either in connection 

with a second covered action or a 

related action) and the subsequent 

award application is based on the ‘‘same 

general information’’ from the 

whistleblower as the earlier award 

determination. Is there a different 

standard that the Commission should 

apply for invoking the rule in these 

situations? In particular, should the 

proposed rule be applicable in either a 

narrower or a broader set of 

circumstances where information 

provided by a whistleblower results in 

multiple actions? Please explain the 

reasons for your view. 

18. Proposed paragraph (d) would 

permit the Commission to consider the 

potential dollar amount of the award 

when applying each of the existing 

award criteria in Exchange Act Rule 

21F–6(a) and 6(b), provided that the 

Commission determined that the likely 

total payout to the whistleblower 

resulting from the original information 

that he or she provided was $100 

million or greater. As explained above, 

this would allow the Commission to 

consider each award factor in dollar 

terms rather than to apply exclusively a 

percentage assessment that does not 

take into account what those percentage 

adjustments would translate to in actual 

dollars paid to the whistleblower. 

a. Should the Commission consider 

the dollar value of an award that 

involves the collection of at least $100 

million in monetary sanctions in 

determining the size of the award? Why 

or why not? 

b. As part of this rulemaking, should 

we expand this approach so that it 

would cover all awards considered 

under Exchange Act Rule 21F–6, even 

those below the $100 million threshold? 

Would such a revision to the award 

determination approach under 

Exchange Act Rule 21F–6 allow us to 

better assess each enhancement or 

reduction in dollar terms (as well as 

percentage terms) so that we could more 

realistically and concretely assess the 

impact of each award factor on the 

overall award to ensure that we are 

appropriately rewarding the 

whistleblower and incentivizing future 

whistleblowers? Why or why not? 

19. With respect to the interpretive 

guidance concerning ‘‘unreasonable 

delay,’’ is the 180-day rebuttable 

presumption of unreasonable delay 

appropriate? Does establishing such a 

presumption help to put individuals on 

notice that they should come forward 

without an inappropriate delay? Please 

explain. 


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128 17 CFR 240.21F–2. 

129The Commission anticipates that this 

proposed rule change, if adopted, would apply as 

follows: With respect to employment retaliation 

claims, the proposed rule would apply only to 

employment-retaliation violations occurring after 

the effective date of the rules; with respect to award 

eligibility and confidentiality protections, the 

proposed rule would apply only to information 

about a potential securities law violation that is 

submitted for the first time by an individual after 

the effective date of the rules. 

130 17 CFR 240.21F–2(a). 

131 17 CFR 240.21F–2(b). 

132 15 U.S.C. 78u–6(h)(1). 

133 15 U.S.C. 78u–6(a)(6). 

134 15 U.S.C. 78u–6(h)(1)(A)(i)–(iii). 

135 138 S. Ct. 767 (2018). 

136 Digital Realty, 138 S. Ct. at 781–82. 

137 Id. 

138 Id. at 777 (quoting S. Rep. No. 111–176, at 38 

(2010)). 

139 15 U.S.C. 78u–6(a)(6). 

140 Digital Realty, 138 S. Ct. at 781 (‘‘[T]he statute 

expressly delegates authority to the SEC to establish 

the ‘manner’ in which information may be provided 

to the Commission by a whistleblower.’’) (citing 

Section 21F(a)(6)). 

141 17 CFR 240.21F–2(a). 

142 17 CFR 240.21F–9(a). 

143We believe that Section 21F(a)(6) and Digital 

Realty do not require a uniform ‘‘manner’’ of 

providing information for all purposes under 

Section 21F, and that we have discretion whether 

to specify different manners for the awards, 

confidentiality, and retaliation contexts. But we 

believe that specifying a uniform ‘‘manner’’ of 

providing information—that is, in writing—for all 

three contexts is appropriate for the reasons that 

follow in the discussion above. See also 15 U.S.C. 

78u-6(c)(2)(D) (‘‘No award under subsection (b) 

shall be made . . . to any whistleblower who fails 

to submit information to the Commission in such 

form as the Commission may, by rule, require.’’). 

144We believe it appropriate not to enumerate the 

activities in Section 21F(h)(1)(A)(ii) (specifically, 

‘‘initiating, testifying in, or assisting in any 

investigation or judicial or administrative action of 

the Commission’’) as additional manners of 

providing information to the Commission under 

Section 21F(a)(6). See Digital Realty, 138 S. Ct. at 

781 (‘‘Nothing in today’s opinion prevents the 

agency from enumerating additional means of SEC 

reporting—including through testimony protected 

by clause (ii)’’ of Section 21F(h(1)(A).). Given clause 

(ii)’s cross-reference to ‘‘such information’’ 

provided under clause (i), we believe that clause (ii) 

is best read as extending employment retaliation 

protections to acts of continued cooperation by a 

person who has already provided information to the 

Commission. 

E. Proposed Amendment to Exchange 

Act Rule 21F–2 128 Addressing 

Whistleblower Status and Certain 

threshold Criteria Related to Award 

Eligibility, Heightened Confidentiality 

From Identity Disclosure, and 

Employment Anti-Retaliation 

Protection 129

As adopted by the Commission in 

2011, Rule 21F–2(a) 130 describes the 

qualifications to be a whistleblower for 

purposes of the award program and 

heightened confidentiality protections, 

and Rule 21F–2(b) 131 provides a 

separate, broader definition of the term 

that is applicable to the employment 

anti-retaliation provisions in Section 

21F(h)(1) of the Exchange Act.132

Specifically, unlike Rule 21F–2(a), Rule 

21F–2(b) defines a whistleblower not by 

reference to the statutory definition of 

the term in Exchange Act Section 

21F(a)(6) 133—i.e., as one who reports to 

the Commission—but instead by 

reference to the protected activities 

described in Section 21F(h)(1)(A)(i)– 

(iii), including the internal reporting 

described in clause (iii) of that 

provision.134 The Supreme Court 

recently held in Digital Realty Trust, 

Inc. v. Somers,135 however, that a 

whistleblower under Section 21F of the 

Exchange Act must report a possible 

securities law violation to the 

Commission in order to qualify for 

employment retaliation protection 

under Section 21F(h)(1), and that the 

Commission’s rule interpreting the term 

more broadly in connection with 

Section 21F’s retaliation protections was 

therefore not entitled to deference.136

The Court reasoned that Dodd-Frank’s 

definition of ‘‘whistleblower,’’ codified 

in Section 21F(a)(6), requires such a 

report to the Commission as a 

prerequisite for anti-retaliation 

protection, and that this definition is 

‘‘clear and conclusive.’’ 137 The Court 

also determined that strict application 

of the definition’s reporting requirement 

in the employment anti-retaliation 

context is consistent with Congress’s 

core objective of ‘‘ ‘motivat[ing] people 

who know of securities law violations to 

tell the SEC.’ ’’ 138

Accordingly, we believe that it is 

appropriate to amend Rule 21F–2 to 

conform to the Supreme Court’s 

construction of Section 21F. Proposed 

Rule 21F–2(a) would provide a uniform 

definition for whistleblower status to 

apply for all purposes under Section 

21F—award eligibility, confidentiality 

protections, and anti-retaliation 

protections—consistent with the 

Supreme Court’s application of the 

whistleblower definition in Section 

21F(a)(6), which defines the term 

‘‘whistleblower’’ as any individual who 

provides, or 2 or more individuals 

acting jointly who provide, information 

relating to a violation of the securities 

laws to the Commission, in a manner 

established, by rule or regulation, by the 

Commission.139

Proposed Rule 21F–2(a) would track 

this whistleblower definition by 

conferring whistleblower status only on 

(i) an individual (ii) who provides the 

Commission with information ‘‘in 

writing’’ and only if (iii) ‘‘the 

information relates to a possible 

violation of the federal securities laws 

(including any law, rule, or regulation 

subject to the jurisdiction of the 

Commission) that has occurred, is 

ongoing, or is about to occur.’’ We 

address these three points in turn. 

First, proposed Rule 21F–2(a)(2) 

would provide whistleblower status to 

individuals and not to legal entities 

(such as corporations). This proposed 

provision would carry forward the 

similar language in existing Rule 21F– 

2(a)(1) without substantive change. We 

believe this position follows from the 

use of the term ‘‘individual’’ in the 

whistleblower definition in Section 

21F(a)(6) and is consistent with the 

focus in Section 21F(h)(1)(A) on 

retaliation by employers in the terms 

and conditions of employment. 

Second, proposed Rule 21F–2(a)(1) 

would afford whistleblower status only 

to an individual who provides the 

Commission with information ‘‘in 

writing.’’ As the Supreme Court 

recognized,140 the whistleblower 

definition in Section 21F(a)(6) gives the 

Commission express authority to 

establish the required ‘‘manner’’ of 

reporting by rule or regulation. In the 

awards eligibility and confidentiality 

contexts, our whistleblower rules 

(specifically, Rule 21F–2(a)(2) 141 and 

Rule 21F–9(a) 142) already require that 

information be provided to the 

Commission in writing either through 

the online portal at www.sec.gov or by 

mailing or faxing a Form TCR (Tip, 

Complaint or Referral) to the 

Commission’s Office of the 

Whistleblower. We now believe it is 

appropriate to exercise our discretion to 

require that an individual provide 

information ‘‘in writing’’ to the 

Commission to qualify as a 

‘‘whistleblower,’’ not only in the awards 

and confidentiality context but also in 

the anti-retaliation context.143 Our 

experience to date in the awards context 

suggests that requiring that information 

be provided in writing presents, at most, 

a minimal burden to individuals who 

want to blow the whistle to the 

Commission while facilitating the staff’s 

ability to track its use of the 

information. Moreover, if we recognized 

additional manners of reporting for antiretaliation purposes (such as placing a 

telephone call), the Commission’s staff 

could be ensnared by disputes in private 

anti-retaliation lawsuits over what 

information was provided to whom on 

what dates. Requiring that any reporting 

be done in writing obviates these 

difficulties.144

Third, proposed Rule 21F–2(a)(1) 

would afford whistleblower status only 

to an individual who provides the 

Commission with information that 

‘‘relates to a possible violation of the 


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145 17 CFR 240.21F–2(a)(1). 

146 15 U.S.C. 78u–6(a)(6) (emphasis added). 

147 Digital Realty, 138 S. Ct. at 781 (quoting S. 

Rep. No. 11–176, at 38). 

148As proposed, Rule 21F–2 would not repeat the 

parenthetical ‘‘(including any law, rule, or 

regulation subject to the jurisdiction of the 

Commission)’’ when the phrase ‘‘federal securities 

laws’’ reappears later in the rule. This would be 

strictly for concision and ease of reading, and not 

to imply any difference of meaning. 

149Section 3(a)(47) of the Exchange Act states that 

the term ‘‘securities laws’’ means the Securities Act 

of 1933 (15 U.S.C. 78a et seq.), the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.), the 

Sarbanes-Oxley Act of 2002, the Trust Indenture 

Act of 1939 (15 U.S.C. 77aaa et seq.), the Investment 

Company Act of 1940 (15 U.S.C. 80a–1 et seq.), the 

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

seq.), and the Securities Investor Protection Act of 

1970 (15 U.S.C. 78aaa et seq.). 

15 U.S.C. 78c(a)(47). 

150 15 U.S.C. 78c(a). 

151See, e.g., Section 21F(h)(1)(A)(iii) (protecting 

‘‘disclosures that are required or protected under 

. . . any other law, rule, or regulation subject to the 

jurisdiction of the Commission’’). 

152 Digital Realty, 138 S. Ct. at 777 (quoting S. 

Rep. No. 111–176, at 38). 

153See American Bankers Assn v. SEC, 804 F.2d 

739, 753 (D.C. Cir. 1986) (‘‘We read the context 

clause [in Section 3 of the Exchange Act] as 

meaning only that if in the case of a frequently 

occurring statutory term, its immediate context 

suggests that a literal application of the statutory 

definition would produce absurd consequences or 

run counter to the obvious thrust of the section, the 

agency may appropriately modify the definition.’’) 

(emphasis added). 

154We note that, under the Commission’s existing 

rules, in order to make an award in connection with 

a related action brought by one of the regulatory or 

law-enforcement entities listed in Rule 21F–3(b)(1) 

(17 CFR 240.21F–3(b)(1)), we 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 that govern awards made in 

connection with Commission actions (see Rule 

21F–3(b)(2), 17 CFR 240.21F–3(b)(2)). This means 

that a whistleblower must comply with the other 

procedures and conditions described in Rules 21F– 

4 and 21F–8 (17 CFR. 240.21F–4 and 240.21F–8) for 

a related action in the same manner and to the same 

degree as is required for the Commission action to 

which the other entity’s action is related. For 

example, under Rule 21F–4(c) (17 CFR 240.21F– 

4(c)) the whistleblower must provide the same 

original information that he or she provided to the 

Commission directly to the other regulatory or lawenforcement entity and that the information the 

whistleblower gave to the other entity must lead to 

successful enforcement of that entity’s action using 

the same criteria described in Rule 21F–4(c)(1)–(3) 

(17 CFR 240.21F–4(c)(1)–(3)) for Commission 

enforcement actions. However, we are proposing to 

modify this requirement through our amendments 

to Exchange Act Rule 21F–3 (17 CFR 24.21F–3) to 

also permit an award in situations where the 

Commission itself shares the whistleblower’s 

information with the other agency. 

155We believe that additional express authority in 

this regard is conferred by Section 21F(c)(2)(D) of 

the Exchange Act. See 15 U.S.C. 78u–6(c)(2)(D) 

(‘‘No award under subsection (b) shall be made . . . 

to any whistleblower who fails to submit 

information to the Commission in such form as the 

Commission may, by rule, require.’’). 

156 15 U.S.C. 78u–6(h)(2). 

157 17 CFR 240.21F–9(a). 

158We are proposing to make a conforming 

amendment to Exchange Act Rule 21F–7(a) (17 CFR 

240.21F–7(a)) to acknowledge the proposed 

requirement that a whistleblower must submit 

information according to the procedures specified 

in Exchange Act Rule 21F–9(a) (17 CFR 240.21F– 

9(a)) in order to qualify for the heightened 

confidentiality protections provided for in 

Exchange Act 21F(h)(2), 15 U.S.C. 78u–(h)(2). 

federal securities laws (including any 

law, rule, or regulation subject to the 

jurisdiction of the Commission) that has 

occurred, is ongoing, or is about to 

occur.’’ Much of this language carries 

over from existing Rule 21F–2 145 and 

simply reflects the extent to which that 

provision already tracked the 

whistleblower definition in Section 

21F(a)(6). At the same time, we are 

mindful of the whistleblower 

definition’s focus on ‘‘information 

relating to a violation of the securities 

laws’’ 146 and of the Supreme Court’s 

admonition that Section 21F, as enacted 

by Dodd-Frank, is ‘‘a law concerned 

only with encouraging the reporting of 

‘securities law violations,’ ’’ as opposed 

to other types of misconduct.147

Consistent with that statutory language 

and purpose, we believe it is 

appropriate to clarify what is implicit in 

the phrase ‘‘securities laws’’—namely, 

that whistleblower status (and thus 

Section 21F’s employment retaliation 

protection) extends only to reports of 

possible violations of federal law, not 

state law, and that it extends broadly to 

reports of possible violations of any law, 

rule, or regulation subject to the 

jurisdiction of the Commission.148

Although Section 3(a)(47) of the 

Exchange Act defines the phrase 

‘‘securities laws’’ more narrowly as 

encompassing only certain statutes,149

by its terms that definition only applies 

‘‘unless the context otherwise 

requires.’’ 150 We believe that the 

context of Section 21F requires 

departing from that definition, given the 

textual clues that Congress designed 

Section 21F to encompass 

whistleblowing with respect to the full 

sweep of federal securities statutes, 

rules, and regulations,151 given 

Congress’s core objective of 

‘‘ ‘motivat[ing] people who know of 

securities law violations to tell the 

SEC,’ ’’ 152 and given the many securities 

regulations whose reported violations 

would fail to trigger award eligibility 

and anti-retaliation protection if 

‘‘securities laws’’ were more narrowly 

defined.153

Additionally, proposed Rule 21F–2(a) 

would confer whistleblower status ‘‘as 

of the time that’’ an individual meets all 

three of the above conditions. We 

believe that this language would clarify 

that whistleblower status is conferred 

only prospectively and not 

retrospectively once all three conditions 

to achieve whistleblower status are met. 

Proposed Rule 21F–2(b), (c), and (d) 

would specify how the whistleblower 

status conferred by subsection (a) 

operates across the various contexts of 

awards eligibility, confidentiality 

protections, and anti-retaliation 

protections, respectively. Much like 

current Rule 21F–2(a), proposed Rule 

21F–2(b) would specify that, to be 

eligible for an award in a Commission 

action based on information provided to 

the Commission, a person ‘‘must 

comply with the procedures and the 

conditions described in Rules 21F–4, 

21F–8, and 21F–9 (respectively, sections 

240.21F–4, 240.21F–8, and 240.21F–9 of 

this chapter).’’ 154 Proposed Rule 21F– 

2(b) reiterates, ‘‘You should carefully 

review those rules before you submit 

any information that you may later wish 

to rely upon to claim an award.’’ We 

believe that this proposed language will 

adequately alert individuals who intend 

to claim an award that they must 

comply with the cross-referenced rules, 

especially proposed Rule 21F–9(a) and 

(b), which require the submission of 

information to the Commission either 

on Form TCR or through www.sec.gov, 

accompanied by a declaration sworn 

under penalty of perjury that the 

information submitted is true and 

correct.155 In our experience to date in 

the awards context, compliance with 

existing Rule 21F–9(a) has proven to be 

beneficial for enabling the Commission 

to determine, in a precise and reliable 

manner, which persons submitted 

which information on which dates. 

Proposed Rule 21F–2(c) would 

specify that, to qualify for 

confidentiality protections afforded by 

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

Act 156 based on information provided 

to the Commission, a person ‘‘must 

comply with the procedures and the 

conditions described in’’ Rule 21F– 

9(a)—that is, must submit information 

using the Commission’s online portal or 

Form TCR.157 We believe it is 

appropriate to adopt this provision both 

to codify the current practice of the 

Commission’s staff and to clarify for 

future whistleblowers the conditions for 

receiving confidentiality protections. 

Further, requiring whistleblowers to 

adhere to the procedures specified in 

Rule 21F–9(a) helps the staff to 

appreciate quickly and clearly which 

whistleblowers are seeking the 

heightened confidentiality protections 

provided by Section 21F(h)(2) of the 

Exchange Act when, among other 

things, sharing the whistleblowers’ 

information with other governmental 

agencies.158


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159 138 S. Ct. at 777 (quoting Section 21F(a)(6), 15 

U.S.C. 78u–6(a)(6)). 

160 Id. (citing Section 21F(h)(1)(A)(i)–(iii), 15 

U.S.C. 78u–6(h)(1)(A)(i)–(iii)). 

161 15 U.S.C. 78u–6(h)(1)(A). 

162See 138 S. Ct. at 778 (‘‘Somers did not provide 

information ‘to the Commission’ before his 

termination, § 78u–6(a)(6), so he did not qualify as 

a ‘whistleblower’ at the time of the alleged 

retaliation. He is therefore ineligible to seek relief 

under § 78u–6(h).’’). 

163 17 CFR 240.21F–2(b)(1)(i). 

164 15 U.S.C. 78u–6(h)(1)(A)(i)–(iii). 

165We are not proposing to define the term 

‘‘lawful act’’ under Section 21F(h)(1)(A) or 

otherwise to offer guidance as to its meaning. We 

note that the term does appear in a number of 

federal employment anti-retaliation statutes, but it 

does not appear that any of these statutes define the 

term. See, e.g., Marcella Auerbachian and Michael 

W. Paddock, Legal Ethics: Lines in the Sand—The 

Intersection of Bringing and Defending a Qui Tam 

False Claims Act Case, 20141006 AHLA Seminar 

Papers 19 (Oct. 6, 2014) (available on Westlaw) 

(‘‘The FCA does not define ‘lawful acts’ ’’). 

166We are aware of one circuit decision 

suggesting in dicta, before the Digital Realty 

decision, that anti-retaliation protection under 

Section 21F(h)(1) should be limited exclusively to 

reports to the Commission. See Martensen v. 

Chicago Stock Exch., 882 F.3d 744, 746 (7th Cir. 

2018). We preliminarily believe that, in this respect, 

Martensen is inconsistent with the Supreme Court’s 

subsequent decision in Digital Realty. See 138 S. Ct. 

at 779 (‘‘With the statutory definition incorporated, 

clause (iii) protects a whistleblower who reports 

misconduct both to the SEC and to another entity, 

but suffers retaliation because of the latter, nonSEC, disclosure.’’). 

167See Digital Realty, 138 S. Ct. at 780–81. 

168We preliminarily believe that this clarification 

helps avoid the incongruous result that a person 

could qualify just once as a whistleblower and then 

receive lifetime protection for any non-Commission 

reports described in clause (iii) with respect to 

distinct securities law violations that occur years 

later. Given the Supreme Court’s instruction that 

Congress’s core objective was to encourage reports 

to the Commission, 138 S. Ct. at 777, it makes more 

sense that such a person needs to return to the 

Commission to report the later violations in order 

to receive protection. 

169 17 CFR 240.21F–2(b)(1)(iii). 

170 17 CFR 240.21F–2(b)(2). 

171 15 U.S.C. 78u–6(h)(1). 

Proposed Rule 21F–2(d) would revise 

existing Rule 21F–2(b) to define the 

scope of anti-retaliation protections in a 

way that mirrors the Supreme Court’s 

authoritative reading of Section 21F. As 

the Court explained in Digital Realty, 

the whistleblower definition in Section 

21F(a)(6) ‘‘first describes who is eligible 

for protection—namely, a whistleblower 

who provides pertinent information ‘to 

the Commission,’ ’’ 159 while ‘‘[t]he three 

clauses of [Section 21F(h)(1)(A)] then 

describe what conduct, when engaged 

in by a whistleblower, is shielded from 

employment discrimination.’’ 160

Consistent with that reading, proposed 

Rule 21F–2(d) would explain both who 

is eligible for protection as a 

whistleblower and also what conduct by 

such a person is protected from 

employment retaliation, by requiring a 

person to satisfy several criteria listed in 

paragraph (d)(1). 

In explaining who is eligible for 

employment retaliation protection, 

proposed Rule 21F–2(d)(1)(i) would first 

require that a person ‘‘qualify as a 

whistleblower under subsection (a) 

before experiencing the retaliation’’ for 

which redress is sought. We believe that 

this proposed rule implements the most 

natural reading of Section 21F(h)(1)(A), 

which prohibits retaliation ‘‘against[ ] a 

whistleblower’’ (emphasis added) 161

and also follows from the Supreme 

Court’s focus in Digital Realty on 

whether the plaintiff had reported to the 

Commission before the alleged 

retaliation.162 In addition, proposed 

Rule 21F–2(d)(1)(ii) would carry 

forward the requirement in existing 

Rule 21F–2(b)(1)(i) 163 that the person 

‘‘reasonably believe’’ that the 

information provided relates to a 

possible securities law violation. 

In explaining what conduct is 

protected from retaliation, Rule 21F– 

2(d)(1)(iii) requires that a person must 

perform a ‘‘lawful act’’ that both is 

performed in connection with any of the 

activities described in Section 

21F(h)(1)(A)(i)–(iii) 164 and ‘‘relate[s] to 

the subject matter of’’ the person’s 

submission to the Commission under 

proposed Rule 21F–2(a).165 We believe 

that extending protection to all such 

lawful acts is most consistent with the 

text of Section 21F(h)(1)(A), which 

prohibits retaliation not simply for the 

activities described in Section 

21F(h)(1)(A)(i)–(iii) but for ‘‘any lawful 

act done by the whistleblower’’ in 

performing those activities. Given the 

breadth of Congress’s language, we 

preliminarily anticipate that antiretaliation protection under proposed 

Rule 21F–2(d)(1)(iii) will properly 

encompass actions that are preparatory 

to the conduct described in Section 

21F(h)(1)(A)(i)–(iii), such as printing 

and completing a Form TCR and 

depositing the completed form in a 

mailbox. We also preliminarily 

anticipate that protected conduct under 

proposed Rule 21F–2(d)(1)(iii) will not 

be limited strictly to reports to the 

Commission, since that limitation 

would render clauses (ii) and (iii) of 

Section 21F(h)(1)(A) superfluous, given 

clause (i)’s express coverage of 

Commission reports.166

At the same time, proposed Rule 21F– 

2(d)(1)(iii) would limit anti-retaliation 

protection to lawful acts that ‘‘relate to 

the subject matter’’ of the person’s 

submission to the Commission under 

proposed Rule 21F–2(a). Given the 

silence of Section 21F and the Supreme 

Court’s reluctance to address whether 

any subject-matter connection should be 

required,167 we believe it appropriate to 

clarify that, to receive protection, a 

lawful act must relate to the subject 

matter of the submission to the 

Commission.168

Proposed Rule 21F–2(d)(2) would 

address a timing issue under Section 

21F’s anti-retaliation provisions by 

clarifying that a person does not need to 

qualify as a whistleblower under Rule 

21F–2(a) before performing the lawful 

act described in Rule 21F–2(d)(1)(iii), in 

order to be eligible for anti-retaliation 

protection. In other words, whether 

conduct is protected from retaliation 

would not depend on whether the 

person performing that conduct 

reported to the Commission beforehand 

or afterward (in order to qualify as a 

whistleblower). Section 21F is silent on 

this issue, and we believe that this 

clarification will help maintain 

appropriate incentives for persons to 

make the internal reports described in 

Section 21F(h)(1)(A)(iii) before or at the 

same time as reporting to the 

Commission. Proposed Rule 21F–2(d)(2) 

would reiterate, however, that a person 

must qualify as a whistleblower under 

proposed Rule 21F–2(a) before 

experiencing retaliation. Thus, for 

example, an individual who experiences 

repeated retaliation for a prior lawful 

act, and who first reports to the 

Commission while the retaliation is still 

ongoing, would be protected with 

respect to any retaliation experienced 

after the Commission report but not for 

any retaliation experienced before the 

Commission report. 

Proposed Rule 21F–2(d)(3) would 

carry forward existing Rule 21F– 

2(b)(1)(iii) 169 without substantive 

change. That provision states that the 

anti-retaliation protections apply 

regardless of whether a person satisfies 

the procedures and conditions to qualify 

for an award described in Rules 21F–4, 

21F–8, and 21F–9 (such as, for example, 

submitting the information to the 

Commission using the electronic TCR 

portal on whe Commission’s website or 

completing the required declaration as 

to the accuracy of the information 

submitted in the whislteblower’s tip). 

Proposed Rule 21F–2(d)(4) would 

carry forward existing Rule 21F– 

2(b)(2) 170 without substantive change. 

That provision states that the retaliation 

prohibition in Section 21F(h)(1) 171 and 

the rules thereunder shall be 

enforceable in an action or proceeding 

brought by the Commission. 

To illustrate how we anticipate 

proposed Rule 21F–2 would operate in 

practice, consider the following 

hypothetical scenario: An employee at a 


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172See Digital Realty, 138 S. Ct. at 781 (‘‘Nothing 

in today’s opinion prevents the agency from 

enumerating additional means of SEC reporting— 

including through testimony protected by clause 

(ii)’’ of Section 21F(h)(1)(A).). 

173The Supreme Court has held that a former 

employer’s retaliatory negative reference was 

actionable under Title VII. See, e.g., Robinson v. 

Shell Oil Co., 519 U.S. 337, 346 (1997). Other 

federal anti-retaliation statutes have been held to 

cover such conduct, which is often referred to as 

‘‘blacklisting.’’ See Black’s Law Dictionary (10th ed. 

2014) (defining ‘‘blacklist’’ as ‘‘[t]o put the name of 

(a person) on a list of those who are disfavored and 

are therefore to be avoided or punished,’’ and giving 

as an example, ‘‘the firm blacklisted the former 

employee’’). The Department of Labor’s regulations 

implementing Section 806 of the Sarbanes-Oxley 

Act of 2002 expressly prohibit ‘‘blacklisting’’ of an 

employee, 29 CFR 1980.102(a), and define an 

‘‘employee’’ as ‘‘an individual presently or formerly 

working for a covered person, an individual 

applying to work for a covered person, or an 

individual whose employment could be affected by 

a covered person.’’ Id. § 1980.101(g). In relevant 

part, Section 806 of the Sarbanes-Oxley Act is 

similar to Section 21F(h), providing that no covered 

entity or person may discharge, demote, suspend, 

threaten, harass, or in any other manner 

discriminate against an employee in the terms and 

conditions of employment, and, under Section 

21F(h)(1)(A), that no employer may discharge, 

demote, suspend, threaten, harass, directly or 

indirectly, or in any other manner discriminate 

against, a whistleblower in the terms and 

conditions of employment. 

Both statutes broadly prohibit ‘‘any . . . manner’’ 

of discrimination in the terms or conditions of 

employment. See also Wanamaker v. Columbian 

Rope Co., 108 F.3d 462, 466 (2d Cir. 1997) (noting 

that former employees can state a claim for 

retaliation under the Age Discrimination in 

Employment Act for ‘‘blacklist[ing]’’); Boscarello v. 

Audio Video Sys., Inc., 784 F. Supp. 2d 577, 582 

(E.D. Va. 2011) (former contractor stated a 

retaliation claim under the Fair Labor Standards 

Act against former employer by alleging 

blacklisting). 

174The Commission anticipates that proposed 

Rule 21F–8(d)(1), if adopted, would apply only in 

connection with submissions of information that 

are made by an individual after the effective date 

of the proposed rules. Further, the Commission 

preliminarily anticipates that proposed Rule 21F– 

8(d)(2), if adopted, would apply only to coveredaction and related-action award applications that 

are connected to a Notice of Covered Action (see 

Exchange Act Rule 21F–10(a), 17 CFR 240.21F– 

10(a)) posted on or after effective date of the final 

rules. 

175See Exchange Act Rule 21F–9(a), 17 CFR 240– 

21F–9(a). Under the proposed amendments to 

Exchange Act Rule 21F–2, 17 CFR 240.21F–2, these 

procedures will remain necessary in order for a 

whistleblower to be eligible for an award and to 

obtain the confidentiality protections afforded by 

Exchange Act Section 21F(h)(2), 15 U.S.C. 78u– 

6(h)(2), even though an individual’s status as a 

‘‘whistleblower’’ would no longer turn on 

compliance with these procedures. 

176 17 CFR 240.21F–8. 

publicly traded issuer overhears a 

conversation by colleagues discussing a 

scheme to create an artificial boost for 

reported sales. The employee 

investigates and discovers that sales 

invoices are being generated without 

any corresponding movement of 

inventory, and then reports the possible 

misconduct to the issuer’s chief 

compliance officer. But a week passes 

without any action being taken on the 

report. If the Commission then receives 

an email from that employee in which 

the employee reports the same possible 

misconduct, and in sending the email 

the employee reasonably believed that 

the report relates to a possible securities 

laws violation, then the employee 

would qualify as a whistleblower under 

Rule 21F–2(a) and would be eligible for 

anti-retaliation protections under Rule 

21F–2(d)(1)(i)–(ii) as of the time the 

employee provides the information to 

the Commission. Assuming that the 

employee’s internal report was within 

the scope Section 806(a) of SarbanesOxley, that internal report itself would 

be a protected ‘‘lawful act’’ under Rule 

21F–2(d)(1)(iii). The fact that the 

employee made the internal report 

before the Commission report would not 

make a difference for anti-retaliation 

protections under Rule 21F–2(d)(2). 

That said, if the employee wanted to be 

eligible for an award under Rule 21F– 

2(b) and to qualify for confidentiality 

protections under Rule 21F–2(c), he or 

she would need to make his or her first 

report of that information to the 

Commission using Form TCR or through 

the online portal at www.sec.gov, as 

required by Rule 21F–9(a), and not 

through an email to the Commission. To 

qualify for an award, the employee 

would additionally need to comply with 

the procedures and the conditions 

described in Rules 21F–4, 21F–8, and 

21F–9. 

Request for Comment 

20. Is it reasonable to require that an 

individual provide information to the 

Commission ‘‘in writing’’ to qualify as a 

whistleblower? Is this approach either 

too restrictive or too broad? Are there 

situations in which only some other 

form of communication would be 

possible or preferred? Please explain. 

21. Should our whistleblower rules 

enumerate any other ‘‘manner’’ of 

providing information to the 

Commission for purposes of antiretaliation protection? For example, 

should our rules enumerate testifying 

under oath in an investigation or 

judicial or administrative action of the 

Commission as an additional ‘‘manner’’ 

of providing information to the 

Commission? 172

22. Does the proposed rule reasonably 

require that the lawful acts done by the 

whistleblower must relate to the subject 

matter of the whistleblower’s 

submission to the Commission in order 

for the employment retaliation 

protections to apply? Should a different 

standard apply? Why or why not? 

23. Does the proposed rule 

appropriately address the timing of an 

individual’s report to the Commission 

relative to the protected conduct and to 

any retaliation? 

24. In determining the amount of an 

award, the Commission considers 

participation in internal compliance 

systems. Given the change in antiretaliation protections, should the 

Commission still use this criteria in 

determining the size of whistleblower 

awards? Why or why not? 

25. Would it be necessary or 

appropriate to specify additional types 

of misconduct that fall within the 

prohibition in Section 21F(h)(1)(A) 

against ‘‘any other manner [of] 

discriminat[ion] against[ ] a 

whistleblower’’? For example, should 

our rules clarify that if an employer 

rejects a prospective employee, or a past 

employer attempts to cause such 

rejection, because that individual had 

engaged in activity protected under Rule 

21F–2, this would be a form of 

retaliation covered by Section 

21F(h)(1)(A)? 173

F. Proposed Amendment to Rule 21F–8 

To Add New Paragraph (d) To Provide 

the Commission With Additional 

Flexibility Regarding the Forms Used in 

Connection With the Whistleblower 

Program (and Corresponding 

Amendments to Rule 21F–10, Rule 21F– 

11, and Rule 21F–12) 174

Currently an applicant seeking to 

submit information to the Commission 

in order to qualify as a whistleblower 

(for purposes of the award and 

confidentiality components of the 

whistleblower program) must submit 

this information by using one of two 

methods: (1) By providing the 

information through an online portal on 

the Commission’s website, or (2) by 

submitting the paper Form TCR that was 

adopted by the Commission as part of 

the original whistleblower rulemaking 

in 2011.175 Periodically the Commission 

has determined that it would be 

beneficial to modify the online portal. 

However, this has resulted in 

discrepancies forming over time 

between the information collected 

through the online portal and that 

elicited by Form TCR. 

To provide the Commission with the 

ability to make timely corresponding 

adjustments to the Form TCR when the 

Commission determines to modify the 

online portal, the Commission proposes 

to modify Exchange Act Rule 21F–8 176

by adding a new paragraph (d)(1) 

providing that the Commission will 

periodically designate on the 

Commission’s web page a Form TCR 


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177 17 CFR 249.1800. 

178 17 CFR 21F–9(c). 

179 17 CFR 21F–12(a)(2). 

180 17 CFR 21F–10. 

181 17 CFR 21F–11. 

182 17 CFR 21F–12. 

183The Commission anticipates these proposed 

rule changes would apply only to whistleblower 

submissions that are made after the effective date 

of the proposed rules. 

184We are relying on our broad rulemaking 

authority to propose the amendments in this 

section. As noted earlier, Section 21F(j) of the 

Exchange Act, 15 U.S.C. 78u–6(j) grants us ‘‘the 

authority to issue such rules and regulations as may 

be necessary or appropriate to implement’’ the 

whistleblower award program. Similarly, Section 

23(a)(1) of the Exchange Act, 15 U.S.C. 78w(a)(1), 

expressly provides the Commission the ‘‘power to 

make such rules and regulations as may be 

necessary or appropriate to implement the 

provisions’’ of the Exchange Act, and has long been 

understood to provide the Commission with broad 

authority to issue rules and regulations carrying the 

force of law. 

185Under the proposed rule, the Commission 

would not consider any applications made for 

related actions in assessing whether an applicant 

has submitted three or more award applications that 

are frivolous or lack any colorable connection 

between the tip and the enforcement action. The 

Commission would assess only applications 

submitted for Commission actions. 

186 17 CFR 240.21F–8(c)(7). 

(Tip, Complaint, or Referral) that 

individuals seeking to be eligible for an 

award through the process identified in 

§ 240.21F–9(a)(2) shall use. 

In addition to the paper Form TCR, 

the Commission also adopted a paper 

Form WB–APP when it adopted the 

existing rules for the whistleblower 

program. Individuals seeking awards 

must make their award request using 

Form WB–APP. Like Form TCR, Form 

WB–APP can only be modified by 

amending the Code of Federal 

Regulations. However, we believe that it 

may be beneficial to provide the 

Commission with greater administrative 

flexibility to modify the form. Providing 

the Commission with the ability to 

modify the form’s informational 

requirements in a timely fashion should 

also help promote the program’s overall 

efficiency. Accordingly, the 

Commission proposes to modify 

Exchange Act Rule 21F–8 by adding a 

new paragraph (d)(2) providing the 

Commission will also periodically 

designate on the Commission’s web 

page a Form WB–APP for use by 

individuals seeking to apply for an 

award in connection with a Commission 

covered judicial or administrative action 

(15 U.S.C. 21F(a)(1)), or a related action 

(§ 240.21F–3(b)(1) of the chapter). 

In proposing this additional 

flexibility, we note that both Form TCR 

and Form WB–APP elicit information 

used by the Commission to administer 

its whistleblower award program and 

are not public disclosure documents. 

Moreover, we anticipate that the forms 

designated on the Commission’s website 

for use in the whistleblower program 

would be substantially similar to those 

currently referenced in the Code of 

Federal Regulations. 

In accordance with the changes 

discussed above, the following 

corresponding amendments would be 

made. First, the Form TCR177 that the 

Commission adopted when it 

promulgated its whistleblower rules in 

2011 would be repealed and the 

parenthetical Code of Federal 

Regulation citations to that form in 

Exchange Act Rule 21F–9(c) 178 and 

Rule 21F–12(a)(2) 179 would be 

removed. Second, the existing Form 

WB–APP currently referenced in the 

Code of Federal Regulations would be 

repealed and Rule 21F–10,180 Rule 21F– 

11,181 and Rule 21F–12 182 would be 

amended by removing the parenthetical 

references found throughout those rules 

to the Code of Federal Regulation 

citation to the current Form WB–APP. 

Request for Comment 

26. Are there any additional 

considerations or limitations that the 

Commission should consider in 

connection with the proposed rule 

change? For example, should we 

provide that any revisions to paper 

Form TCR or Form WB–APP shall not 

take effect for a 30-day period after 

posting on the Commission website? 

G. Proposed Amendment to Rule 21F–8 

To Add New Paragraph (e) To Clarify 

and Enhance the Commission’s 

Authority To Address Claimants Who 

Submit False Information to the 

Commission or Who Abuse the Award 

Application Process 183

In our experience implementing the 

whistleblower award program to date, a 

small number of claimants have 

imposed an undue burden on the award 

determination process by submitting 

dozens and in some cases over a 

hundred award applications that lack 

any colorable connection between the 

tip that they provided and the 

Commission enforcement actions for 

which they are seeking awards. 

Processing these frivolous award 

applications uses staff resources that 

could otherwise be devoted to 

potentially meritorious award 

applications. Beyond the diversion of 

staff resources, we have found that, by 

utilizing the procedural opportunities to 

object to an award, these repeat 

applicants can significantly delay the 

processing of meritorious award 

applications and the eventual payment 

of awards. 

To prevent these repeat submitters 

from continuing to abuse the award 

application process to the detriment of 

potentially meritorious applicants, we 

believe that it would be appropriate to 

adopt a rule that would permit the 

Commission to permanently bar any 

applicant from seeking an award after 

the Commission determines that the 

applicant has abused the process by 

submitting three frivolous award 

applications.184 Specifically, under our 

proposal, if an applicant submits three 

or more award applications for 

Commission actions that the 

Commission finds to be frivolous or 

lacking a colorable connection between 

the tip (or tips) and the Commission 

action, the Commission may 

permanently bar the applicant from 

submitting any additional award 

applications (either for Commission 

actions or related actions) and the 

Commission would not consider any 

other award applications that the 

claimant has submitted or may seek to 

submit in the future.185

The proposed rule would expressly 

provide, however, that the Office of the 

Whistleblower shall as an initial matter 

(i.e., before any preliminary 

determination or preliminary summary 

disposition would be issued) advise any 

claimant of the Office’s assessment that 

the claimant’s award application for a 

Commission action is frivolous or 

lacking a colorable connection between 

the tip and the action for which the 

individual has sought an award. If the 

applicant withdraws the application at 

that time, it would not be considered by 

the Commission in determining whether 

to exercise its authority to impose a bar 

for three or more frivolous applications 

or applications lacking a colorable 

connection between the tip and the 

Commission action for which the award 

was sought. 

In addition, the proposed rule would 

codify the Commission’s current 

practice with respect to applicants who 

violate Rule 21F–8(c)(7).186 That rule 

provides that an applicant shall be 

ineligible for an award if, in the 

whistleblower’s submission, his or her 

other dealings with the Commission, or 

his or her dealings with another 

authority in connection with a related 

action, he or she 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 with intent to mislead or 

otherwise hinder the Commission or 


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187See Exchange Act section 21F(i), 15 U.S.C. 

78u–6(i). 

188 Importantly, the proposed rule would apply to 

false, fictitious, or fraudulent representations, 

statements, or documents beyond those made in 

connection with an award determination. For 

example, if the Commission finds that an individual 

knowingly or willfully made a false representation 

in testimony to the Commission in one matter, the 

Commission could bar that individual in 

connection with a whistleblower award submitted 

by that individual for an entirely separate matter. 

In this way, we believe that the proposed rule 

would provide an important additional incentive 

for individuals to behave truthfully and honestly 

with the Commission in all aspects of their dealings 

with the agency. 

189We do not intend to foreclose the potential 

that the Commission could impose such a bar in the 

context of a formal adjudicatory proceeding to 

which the individual was a respondent if the 

Enforcement Division made such a request and the 

parties litigated it before the Commission. 

190The Commission anticipates these proposed 

rule changes, if adopted, would apply only in 

connection with submissions of information that 

are made by an individual to qualify as a 

whistleblower after the effective date of the 

proposed rules. 

191 17 CFR 240.21F–9(a). 

192For purposes of the Exchange Act Rule 21F– 

12(a)(2), which provides that a ‘‘whistleblower’s 

Form TCR’’ may be included within the 

administrative record upon which the Commission 

relies in considering a whistleblower award 

application, the reference to Form TCR in this rule 

refers to both the online submission made through 

the Commission’s electronic TCR portal and the 

paper Form TCR. 

193The changes that we are proposing to 

Exchange Act Rule 21F–2, 17 CFR 240.21F–2— 

specifically the unified definition of 

‘‘whistleblower’’ that would apply in the award, 

employment anti-retaliation, and confidentiality 

contexts—as well as the amendments that we are 

proposing to Exchange Act Rule 9(a), 17 CFR 

240.21F–9(a), would render inapplicable on a 

going-forward basis the formal interpretation that 

the Commission issued in 2015 regarding the 

meaning of Exchange Act Rule 21F–9. See 80 FR 

47829, 47830/1, 2015 WL 4710732 (Aug. 10, 2015) 

(‘‘Rule 21F–9(a) . . . specif[ies] the reporting 

procedures that must be followed by an individual 

who seeks to qualify as a whistleblower under Rule 

21F–2(a). . . .’’). 

194We are making a conforming amendment to 

Exchange Act Rule 21F–9(b), 17 CFR 240–21F–9(b), 

to make clear that if a whistleblower provides 

information pursuant to a method permited by 

proposed section 9(b)(3), the whistleblower must 

also complete the declaration required by Exchange 

Act Rule 21F–9(b). 

another authority.187 The Commission 

has issued two final orders that have 

permanently barred the applicants from 

submitting any further whistleblower 

award applications based on violations 

of Rule 21F–8(c)(7). The proposed rule 

would clarify and codify the 

Commission’s authority to bar 

applicants by providing that if the 

Commission finds that a claimant has 

violated paragraph (c)(7) of Rule 21F–8, 

the Commission may permanently bar 

the applicant from making any future 

award applications, and shall decline to 

process any other award applications 

that the claimant has already submitted. 

In our view, it is appropriate to assess 

whether an applicant who engages in 

egregious behavior vis-a`-vis the 

Commission in violation of Rule 21F– 

8(c)(7) should be permanently ineligible 

from obtaining an award. Such 

egregious conduct can result in the 

unnecessary and wasteful diversion of 

staff resources and in extreme cases it 

may expose investors and the public to 

potential harm (particularly where the 

misconduct concerns ongoing 

Commission law-enforcement 

actions).188 Moreover, we believe that 

this proposed rule could discourage 

individuals from engaging in the 

egregious conduct prohibited by Rule 

21F–8(c)(7), particularly when they are 

submitting their award applications, 

because they should recognize that it 

may not only lead to a denial of their 

current award claim but may also 

permanently disqualify them from 

obtaining a whistleblower award. 

Under the proposed rule, the 

Commission would consider a 

permanent bar in the context of 

processing an award application. We 

expect that the preliminary 

determination or preliminary 

disposition addressing the award 

application would include a 

recommendation that the applicant be 

permanently barred; this should serve to 

place the applicant on notice that a bar 

is being considered and afford the 

applicant an opportunity to advance any 

arguments in connection with a 

potential bar before the Commission 

issues a final order.189

Request for Comment 

27. Is it appropriate for OWB to advise 

a claimant of the Office’s assessment 

that the claimant’s award application for 

a Commission action is frivolous, and to 

offer the claimant the opportunity to 

withdrawal his or her award 

application(s), such that the 

application(s) would not be considered 

by the Commission in determining 

whether to impose a bar? 

28. Is it appropriate for the 

Commission to adopt a rule that would 

permanently bar any applicant after he 

or she has been found by either the 

Commission to have submitted at least 

three frivolous award applications? 

Should the number of frivolous award 

applications be fewer or greater before a 

bar would be imposed? 

29. Are there any additional 

procedures, considerations, or 

limitations that the Commission should 

consider in connection with the 

proposed rule change? 

H. Proposed Amendments to Rule 

21F–9 To Provide Additional Flexibility 

and Clarity Regarding Form TCR (and 

Corresponding Technical Amendments 

to Rule 21F–10, Rule 21F–11, and Rule 

21F–12) 190

As noted above, Exchange Act Rule 

21F–9(a) 191 currently provides that to 

qualify as a whistleblower an individual 

may submit information about a 

possible securities law violation by one 

of two methods: ‘‘(1) Online, through 

the Commission’s website located at 

www.sec.gov,’’ or ‘‘(2) [b]y mailing or 

faxing a Form TCR (Tip, Complaint or 

Referral) (17 CFR 249.1800) to the SEC 

Office of the Whistleblower, 100 F 

Street NE, Washington, DC 20549–5631, 

Fax (703) 813–9322.’’ We propose to 

amend this rule to conform to the 

proposed amendments to Exchange Act 

Rule 21F–2 and to clarify that online 

submissions must be made through the 

Commission’s online TCR portal. 

Similarly, we propose to revise the rule 

text to provide the Commission 

additional discretion in designating 

where paper Form TCRs may be sent 

and how whistleblowers may submit 

information to the Commission to 

qualify for an award or confidentiality 

protections. 

The revised language in Rule 21F–9(a) 

would provide that to submit 

information in a manner that satisfies 

§ 240.21F–2(b) and (c) of the chapter, an 

individual must submit his or her 

information to the Commission by either 

of these methods: (1) Online, through 

the Commission’s website located at 

www.sec.gov, using the Commission’s 

electronic TCR portal (Tip, Complaint or 

Referral); (2) by mailing or faxing a 

Form TCR to the SEC Office of the 

Whistleblower at the mailing address or 

fax number identified on the SEC’s web 

page for making such submissions; or 

(3) by any other such method that the 

Commission may expressly designate on 

its website as a mechanism that satisfies 

§ 240.21F–2(b) and (c).192 We believe 

that the clarifications and flexibility 

afforded by the proposed revisions 

should help to make the whistleblower 

program more user-friendly for potential 

whistleblowers.193 New paragraph (b)(3) 

would, among other things, afford the 

Commission discretion to identify 

alternative mechanisms for submitting 

information in instances where, for 

example, the Commission’s on-line 

portal may be unavailable due to a 

maintenance or replacement.194

We are also proposing to add new 

paragraph (e) to Exchange Act Rule 

21F–9 to clarify that the first time an 

individual provides information to the 

Commission that the individual will 

rely upon as a basis for claiming an 

award, the individual must provide that 


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34724 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 

195To illustrate the intersection of proposed 

amended Rule 21F–2(a) and proposed Rule 21F– 

9(e): An individual who provides the Commission 

with information about a possible violation of the 

federal securities laws in writing will qualify as a 

whistleblower and obtain the retaliation protections 

provided under Section 21F(h)(1) of the Exchange 

Act, 15 U.S.C. 78u–6(h)(1). However, to be eligible 

for an award as to that information, the individual 

must make the initial submission of that 

information in accordance with the procedures set 

forth in Rules 21F–9(a) and (b); i.e., the individual 

must submit the information on Form TCR or 

through the Commission’s online TCR portal and 

must execute the required declaration. The 

individual may remain award-eligible for any new 

information that is submitted in accordance with 

the Rule 21F–9 procedures, but not for the 

information that was previously submitted without 

following those procedures. 

196 In a few instances, the Commission has 

allowed individuals to perfect a defective 

submission provided that the individual did so 

promptly and before any significant investigative 

steps had occurred with respect to the submission. 

Any opportunity to perfect a defective submission 

would, under the proposed rule, be governed by the 

limited exception provided therein (which is 

generally consistent with the opportunities the 

Commission has to date provided in allowing 

individuals to perfect their submissions). 

197 If the proposed amendments in this release are 

adopted, Exchange Act 21F–9(a) would be revised 

to provide that to submit information in a manner 

that satisfies § 240.21F–2(b) and (c) of the chapter 

an individual must submit his or her information 

to the Commission by any of these methods: (1) 

Online, through the Commission’s website located 

at www.sec.gov, using the Commission’s electronic 

TCR portal (Tip, Complaint or Referral); (2) Mailing 

or faxing a Form TCR to the SEC Office of the 

Whistleblower at the mailing address or fax number 

designated on the SEC’s web page for making such 

submissions; or (3) By any other such method that 

the Commission may expressly designate on its 

website as a mechanism that satisfies § 240.21F– 

2(b) and (c). Based on the proposed modifications 

to Exchange Act Rule 21F–9(b), it would provide 

that, further, to be eligible for an award, the 

individual must declare under penalty of perjury at 

the time he or she submits the information pursuant 

to paragraph (a)(1), (2), or (3) of the section that the 

information is true and correct to the best of his or 

her knowledge and belief. 

198By requiring that the Commission must find 

that the administrative record ‘‘clearly and 

convincingly’’ demonstrates that the individual 

would (but for the untimely compliance with the 

requirements of Exchange Act Rules 21F–9(a) and 

(b)) qualify for an award, we mean to make this 

discretionary mechanism available only in those 

cases where there can be no serious doubt about the 

individual’s contribution to the successful action 

and the individual’s compliance with the award 

criteria and eligibility conditions. Otherwise, in 

determining whether to employ its discretion, the 

Commission would have to potentially expend 

considerable staff time and effort carefully 

developing an administrative record and analyzing 

whether the applicant would have been a 

meritorious whistleblower, and only then turn to 

decide whether to exercise its discretion to waive 

what is otherwise a threshold procedural 

requirement. 

199 Individuals do not have an entitlement to a 

deficiency letter and their failure to receive one will 

not be deemed a basis to excuse their failure to 

comply with the terms of Exchange Act Rule 

21F–2. It is each individual’s own responsibility to 

comply with the requirements of the Commission’s 

rules with respect to submitting information to 

qualify for an award. 

200We believe that using a 30-day time period is 

sufficient here. We note that in connection with 

judicial proceedings 30-day filing deadlines are not 

uncommon—indeed, Congress itself provided only 

a 30-day window for unsuccessful whistleblowers 

to challenge a Commission final order denying their 

award application, see Exchange Act section 21F(f), 

15 U.S.C. 78u–6(f)—and that our proposed Rule 

21F–18, discussed infra, affords a 30-day time 

period for applicants to respond to preliminary 

summary dispositions that would be issued under 

that proposed rule. 

information in accordance with the 

procedures specified in Rules 21F–9(a) 

and (b). If an individual fails to do so, 

the individual will—subject to the 

limited exception discussed below—be 

barred from subsequently resubmitting 

the same information to the Commission 

in accordance with Rules 21F–9(a) and 

(b) and seeking to obtain an award based 

on that information, even if the 

individual has previously qualified as a 

whistleblower under the proposed 

amendment to Rule 21F–2(a) by 

submitting the information in some 

other written form.195 To date, this has 

been the approach that the Commission 

has followed in making award 

determinations.196 We believe that the 

proposed rule language would provide 

additional clarity to potential 

whistleblowers to further alert them to 

the importance of following the 

procedures specified in Rules 21F–9(a) 

and (b).197 In proposing this 

amendment, we observe that 

compliance with the procedures in 

Rules 21F–9(a) and (b) advances many 

programmatic purposes. These include 

allowing the Commission to promptly 

determine whether an individual who 

submits information is subject to 

heightened whistleblower 

confidentiality protections; helping the 

staff efficiently process the information 

and other documentation provided by 

the individual and assess its potential 

credibility; and assisting the 

Commission in eventually evaluating 

the individual’s potential entitlement to 

an award. 

Proposed paragraph (e) would also 

incorporate a limited exception that 

would permit the Commission, in its 

sole discretion, to make an award to a 

whistleblower who failed to comply 

with the procedural requirements of 

Rules 21F–9(a) and (b) when the 

individual first provided information to 

the Commission. The limited exception 

permitted by paragraph (e) would 

provide that notwithstanding the 

foregoing, the Commission, in its sole 

discretion, may waive an individual’s 

non-compliance with paragraphs (a) and 

(b) of Rule 21F–9 if the Commission 

determines that the administrative 

record clearly and convincingly 

demonstrates that the individual would 

otherwise qualify for an award and the 

individual demonstrates that he or she 

complied with the requirements of 

paragraphs (a) and (b) within 30 days of 

the first communication with the staff 

about the information that the 

individual provided.198 There may be 

some situations where an individual 

will have provided information to the 

Commission about a potential securities 

law violation but may have failed to 

perfect his or her submission in 

accordance with the procedures 

required to be a whistleblower eligible 

for an award. For example, an 

individual may learn about a potential 

securities law violation that is about to 

occur and may telephonically inform 

the staff in an effort to permit the 

Commission to take action before the 

violation occurs. Similarly, the Office of 

the Whistleblower periodically receives 

letters from individuals seeking to 

report securities law violations and the 

Office will generally provide deficiency 

notices to these individuals to the extent 

that it appears that these individuals 

want to become whistleblowers eligible 

for an award.199 We believe that, to the 

extent that the information that any 

such individual might provide could be 

the basis for the Commission bringing a 

successful enforcement action, the 

Commission should have within its 

discretion the ability to make an award 

provided that the individual complies 

with Rules 21F–9(a) and (b) within 30 

days of receiving a deficiency letter (or 

having any other communication with 

the staff concerning the information that 

the individual provided).200

Request for Comment 

30. Does proposed Rule 21F–9(a) 

provide additional clarity and flexibility 

that may help make the submission of 

information by potential whistleblowers 

more user-friendly? Are there any 

additional factors that the Commission 

should assess in connection with the 

proposed rule amendments? 

31. Please comment on the limited 

exception provided for in proposed Rule 

9(e) appropriate. Should the exception 

be adopted? If so, should it be narrowed 

or broadened? Should the 30-day time 

period be extended or reduced? 


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Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 34725 

201The Commission anticipates this proposed 

rule change, if adopted, would apply only to 

covered-action and related-action award 

applications that are connected to a Notice of 

Covered Action (see Exchange Act Rule 21F–10(a), 

17 CFR 240.21F–10(a)) posted on or after effective 

date of the final rules. 

202 17 CFR 240.21F–12. 

203 17 CFR 240.21F–12(a)(3). 

204 17 CFR 240.21F–10(a) & (b). 

205 17 CFR 240.21F–11(a) & (b). 

206 17 CFR 240.21F–8(b). 

207 17 CFR 240.21F–10(e). 

208 17 CFR 240.21F–11(e). 

209See Exchange Act Rule 21F–8(a), 17 CFR 

240.21F–8(a). 

210 17 CFR 240.21F–12(a)(6). 

211The Commission anticipates this proposed 

rule change, if adopted, would apply only to 

covered-action and related action award 

applications that are connected to a Notice of 

Covered Action (see Exchange Act Rule 21F–10(a), 

17 CFR 240.21F–10(a)) posted on or after effective 

date of the final rules. 

212 17 CFR 240.21F–13. 

213 17 CFR 240.21F–13(b). 

214EarthReports, Inc. v. FERC, 828 F.3d 949, 959 

(D.C. Cir. 2016). 

215Rule 16(a) states, 

The record on review or enforcement of an 

agency order consists of: 

(1) The order involved; 

(2) any findings or report on which it is based; 

and 

(3) the pleadings, evidence, and other parts of the 

proceedings before the agency. 

Fed. R. App. P. 16(a)(1)–(3) (emphases added). 

I. Proposed Amendment to Rule 21F–12 

Regarding the Materials That May 

Form the Basis of the Commission’s 

Award Determination 201

Rule 21F–12 202 lists the materials that 

the Commission and the Claims Review 

Staff (‘‘CRS’’) may rely upon to make a 

whistleblower award determination. We 

are proposing to make two clarifying 

amendments to that rule. 

First, Rule 21F–12(a)(3) 203 currently 

permits the Commission and the CRS to 

rely upon the whistleblower’s Form 

WB–APP, including attachments, and 

‘‘any other filings or submissions from 

the whistleblower in support of the 

award application.’’ Based on this 

provision’s silence as to the timeliness 

of such ‘‘other filings or submissions,’’ 

some whistleblower award claimants 

have submitted hundreds of pages of 

supplemental information on an 

ongoing basis even after expiration of 

the respective time periods for 

responding to a Notice of Covered 

Action or a Preliminary Determination, 

resulting in significant administrative 

burdens on the Office of the 

Whistleblower and potential delays to 

the whistleblower claims process. We 

believe that expressly excluding 

untimely supplemental submissions 

from consideration by the Commission 

and the CRS would incentivize 

applicants to make thorough 

submissions in the first instance when 

responding to the Notice of Covered 

Action and the CRS’s Preliminary 

Determination (or a Preliminary 

Summary Disposition issued by the 

Office of the Whistleblower under 

Proposed Rule 21F–18, discussed infra), 

which should reduce these 

administrative burdens and the 

potential for delays to the claims 

process. 

Accordingly, we propose amending 

Rule 21F–12(a)(3) to clarify that the 

Commission and the CRS (and the 

Office of the Whistleblower when 

processing a claim pursuant to proposed 

Rule 21F–18) may rely upon materials 

timely submitted by the whistleblower 

in response either to the Notice of 

Covered Action, to a request from the 

Office of the Whistleblower or the 

Commission, or to the Preliminary 

Determination. The deadline for filing a 

claim for a whistleblower award is 

ninety (90) days after the relevant 

Notice of Covered Action under Rule 

21F–10(a) & (b) 204 and Rule 21F–11(a) 

& (b).205 Consistent with Rule 21F– 

8(b),206 the Commission may specify a 

deadline when it requests additional 

information from the whistleblower in 

support of an award application. The 

time frame for responding to the 

Preliminary Determination is expressly 

established by Rule 21F–10(e) 207 and 

Rule 21F–11(e).208 Under our proposal, 

materials submitted outside those 

respective time frames would not be 

considered absent extraordinary 

circumstances excusing the delay.209

Second, we propose amending Rule 

21F–12(a)(6),210 which currently 

provides in pertinent part that the 

Commission and the Claims Review 

Staff in making an award determination 

may consider any ‘‘documents or 

materials including sworn declarations 

from third-parties that are received or 

obtained by the Office of the 

Whistleblower to assist the Commission 

resolve the claimant’s award 

application, including information 

related to the claimant’s eligibility.’’ We 

propose to modify this provision to 

clarify that it applies only to materials 

submitted by third parties, because 

some claimants have misinterpreted it 

as also encompassing materials 

submitted by the claimants themselves. 

Moreover, in light of the modification 

that we are proposing to Rule 21F– 

12(a)(3) to require that a claimant make 

a ‘‘timely’’ submission in response to a 

Preliminary Determination, we believe 

that it is important to clarify that Rule 

21F–12(a)(6) does not apply to 

information provided by 

whistleblowers. 

Request for Comment 

32. Does the proposed amendment as 

to timeliness provide an appropriate 

safeguard against abusive supplemental 

filings by whistleblower award 

claimants? 

33. Do the proposed amendments 

provide sufficient clarity? Is there 

alternative language that might provide 

greater clarity about the materials that 

the Commission and the CRS may rely 

upon in making an award 

determination? 

J. Proposed Amendment to Rule 21F–13 

Regarding the Administrative Record on 

Appeal 211

Rule 21F–13 212 describes the 

availability of judicial review and the 

record on appeal of a whistleblower 

award determination by the 

Commission. Rule 21F–13(b) provides 

that the record on appeal will consist of 

the Preliminary Determination (or a 

Preliminary Summary Disposition 

issued under proposed Rule 21F–18, 

discussed infra), the Final Order of the 

Commission, ‘‘and any other items from 

those set forth in Rule 21F–12(a) of this 

chapter that either the claimant or the 

Commission identifies for inclusion in 

the record.’’ 213 That provision thus 

ensures that the record on appeal will 

include the materials described in Rule 

21F–12(a) that were the basis for the 

Commission’s award determination. 

Some claimants have interpreted Rule 

21F–13(b) as permitting them to 

designate materials for inclusion in the 

record on appeal that technically meet 

the descriptions in Rule 21F–12(a) but 

that were never actually before the 

Commission in issuing the Final Order. 

However, that interpretation creates 

significant tension with the basic 

principle of administrative law that, on 

appeal, ‘‘the court’s review is limited to 

the administrative record before the 

agency at the time of its decision.’’ 214

That interpretation also would 

inappropriately expand the record on 

appeal beyond the limits in Rule 16 of 

the Federal Rules of Appellate 

Procedure.215

As amended, Rule 21F–13(b) would 

eliminate the designation of items for 

inclusion in the record on appeal and 

instead would define the record on 

appeal in a manner that conforms more 

closely to Rule 16 of the Federal Rules 

of Appellate Procedure. Materials 

designated or submitted by a 

whistleblower for the first time after the 

Commission issues its Final Order 


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34726 Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 

216 15 U.S.C. 78u–6(h)(2)(A). 

217The Commission anticipates that proposed 

Rule 21F–18, if adopted, would apply to any 

whistleblower award application for which the 

Commission has not yet issued a Preliminary 

Determination as of the effective date of the 

proposed rules, as well as to any future award 

applications that might be filed. 

218 17 CFR 240.21F–10; 17 CFR 240.21F–11. 

219 17 CFR 240.21F–10(e)(2) (providing that if an 

individual decides to contest the Preliminary 

Determination, he or she must submit his or her 

written response and supporting materials within 

sixty (60) calendar days of the date of the 

Preliminary Determination, or if a request to review 

materials is made pursuant to paragraph (e)(1) of 

the section, then within sixty (60) calendar days of 

the Office of the Whistleblower making those 

materials available for your review.). 

220 17 CFR 240.21F–11(e)(2). We believe that 30- 

day response period is sufficient and have 

considered the fact that judicial proceedings often 

rely on this same time period for filing responsive 

materials. See, e.g., Fed. R. of App. P. 31(a)(1) 

(establishing a default 30-day time period for an 

appellee or respondent to file a response brief to the 

appellant or petitioner’s opening brief). See also 

Rule 450(a) of the SEC’s Rules of Practice 

(providing that in adjudicatory proceedings 

pending before the Commission ‘‘[o]pposition briefs 

shall be filed within 30 days after the date opening 

briefs are due’’). 

221The time periods for submitting an award 

application are specified in Rule 21F–10(b) and 

Rule 21F–11(b). See 17 CFR 240.21F–10(b) & 

240.21F–11(b). 

222 17 CFR 240.21F–9. 

would not be deemed part of the 

administrative record. 

Under amended Rule 21F–13(b), the 

record on appeal therefore would 

include the Final Order of the 

Commission, any materials that were 

considered by the Commission in 

issuing the Final Order, and any 

materials that were part of the claims 

process leading from the Notice of 

Covered Action to the Final Order. In 

the interest of clarity, Rule 21F–13(b) 

would specify that this includes, but is 

not limited to, the materials that are part 

of the claims process described in Rules 

21F–10 and 21F–11 and proposed Rule 

21F–18: The Notice of Covered Action, 

whistleblower award applications filed 

by the claimant, the Preliminary 

Determination (or Preliminary Summary 

Disposition), materials that were 

considered by the Claims Review Staff 

in issuing the Preliminary 

Determination (or by the Office of the 

Whistleblower in issuing a Preliminary 

Summary Disposition), and materials 

that were timely submitted by the 

claimant in response to the Preliminary 

Determination (or the Preliminary 

Summary Disposition). Additional 

materials not specifically listed in the 

parenthetical in proposed Rule 21F– 

13(b) might become part of the claims 

process and therefore part of the record 

if, for example, the Office of the 

Whistleblower obtains materials from a 

third party and provides them to the 

Commission for its consideration in 

resolving a whistleblower award 

application. See Rule 21F–12(a)(6). 

In addition, we are proposing to 

amend the second sentence of Rule 

21F–13(b) to clarify that the record on 

appeal would not include any predecisional or internal deliberative 

process materials that are prepared 

exclusively to assist either the 

Commission or the CRS. That provision 

currently references only the 

Commission. This change would clarify 

the Commission’s current practice in 

order to give greater clarity to claimants 

pursuing appeals. 

We also propose adding a third 

sentence to Rule 21F–13(b) providing 

that, when more than one claimant 

applies for an award under a single 

Notice of Covered Action, the 

Commission may exclude from the 

record on appeal any materials that 

exclusively concern any claimant other 

than the claimant who brought the 

appeal, as necessary to comply with the 

confidentiality protections in Section 

21F(h)(2)(A) of the Exchange Act.216

This sentence would codify the 

Commission’s current practice in order 

to give greater clarity to claimants 

pursuing appeals. 

Request for Comment 

34. We seek comments about whether 

the proposed language sufficiently 

conforms to Rule 16 of the Federal Rules 

of Appellate Procedure and whether 

alternative language would provide 

greater conformity or clarity. 

K. Proposed Rule 21F–18 Establishing a 

Summary Disposition Process 217

Over the course of the years that the 

Commission has implemented the 

whistleblower award program, it has 

become apparent to us that a significant 

number of award applications may be 

denied on relatively straightforward 

grounds because they do not implicate 

novel or important legal or policy 

questions. These grounds for denial 

include, among other things, the fact 

that the individual did not comply with 

the form-and-manner requirements as 

specified in Rule 21F–9 for submitting 

information to be eligible for an award, 

or that the information was not used by 

the staff responsible for investigating, 

preparing and litigating the covered 

action and thus the individual’s 

information did not ‘‘lead to’’ the 

success of the covered action. 

In an effort to provide a more timely 

resolution of relatively straightforward 

denials, we are proposing a summary 

disposition process. This process would 

be in lieu of the claims adjudication 

processes that are specified in Rule 

21F–10 and Rule 21F–11.218 The 

principal difference between the 

proposed summary disposition process 

and the existing processes specified in 

Rule 21F–10 and 21F–11 is that for a 

claim designated for summary 

disposition the CRS would not be 

involved in reviewing the record, 

issuing a Preliminary Determination, 

considering any written response filed 

by the claimant, or issuing the Proposed 

Final Determination; these functions 

would be assumed by the Office of the 

Whistleblower in an effort to streamline 

the Commission’s consideration of 

denials that are relatively 

straightforward. 

The proposed summary disposition 

process incorporates two other 

modifications that should help expedite 

the processing of denials. First, the 30- 

day period for replying to a Preliminary 

Summary Disposition would be shorter 

than the 60-day period for replying to a 

Preliminary Determination provided for 

by Rule 21F–10(e)(2) 219 and 21F– 

11(e)(2).220 We believe that this shorter 

period should be sufficient for a 

claimant to reply and that it is 

appropriate given that the matters 

subject to summary disposition should 

be relatively straightforward. Second, 

under the proposed summary 

disposition process, a claimant would 

not have the opportunity to receive the 

full administrative record upon which a 

Preliminary Denial would have been 

based. Instead, the Office of the 

Whistleblower would (to the extent 

appropriate given the nature of the 

denial) provide the claimant with a staff 

declaration that contains the pertinent 

facts upon which the Preliminary 

Summary Disposition is based. Given 

the relatively straightforward nature of 

the matters that would generally be 

eligible for summary disposition, we 

believe that this modification from the 

record-review process specified in Rules 

21F–10 and 21F–11 should still afford 

any claimant a sufficient opportunity to 

provide a meaningful reply to a 

Preliminary Summary Denial. This 

should eliminate the delay that can arise 

when a claimant does not expeditiously 

request the record, thereby helping to 

further expedite the summary 

adjudication process. 

The proposed summary disposition 

process would be available for any nonmeritorious award application that falls 

within any of the following five 

categories: (1) Untimely award 

application; 221 (2) noncompliance with 

the requirements of Rule 21F–9,222

which concerns the manner for 

submitting a tip to be eligible for an 


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Federal Register / Vol. 83, No. 140 / Friday, July 20, 2018 / Proposed Rules 34727 

223 17 CFR 240.21F–8(b). 224The authority to require additional 

information of an applicant is delegated to the 

Office of the Whistleblower. See 17 CFR 240.21F– 

10(d). 225 17 CFR 240.21F–9(a). 226Although the CRS has to date approved all 

proposed final orders involving a challenge to a 

preliminary determination, we do not believe the 

absence of the CRS’s role at the comparable stage 

of the proposed summary disposition process 

should have a meaningful impact given the 

relatively straight-forward nature of the claims that 

would be processed under the proposed rule. 

Further, as a matter of agency internal procedure, 

all proposed final orders are reviewed by the Office 

of the General Counsel and we anticipate that this 

review would occur in connection with all 

Proposed Summary Dispositions issued under this 

proposed rule, further reducing any potential 

negative impact from the elimination of the CRS’s 

role. 

227We note that, the Commission has consistently 

interpreted Rules 10 and 11 to require that all 

claims processed under those rules should be 

addressed in one omnibus final order. The 

summary disposition process that we are proposing 

would, we believe, permit a more expeditious 

adjudication of any relatively straightforward 

denials that might otherwise have been folded into 

a final order under Rule 10 or 11. 

228Pursuant to Rule 21F–14(c)(2), 17 CFR 

240.21F–14(c)(2), the Commission cannot pay an 

award to any meritorious whistleblower in a 

particular matter until the completion of the 

appeals process for all whistleblower award claims 

has been exhausted. 

229 17 CFR 240.21F–12. 

230The Commission anticipates this proposed 

rule change, if adopted, would apply to all new 

whistleblower award applications filed after the 

effective date of the amended final rules, as well as 

all whistleblower award applications that are 

pending and have not yet been the subject of a final 

order of the Commission by the effective date. 

231 17 CFR 240.21F–4(c)(2). 

232 17 CFR 240.21F–4(b)(3). Although we are 

proposing this interpretive guidance for public 

comment, the Commission may determine to rely 

on the principles articulated therein for any 

whistleblower claims that are currently pending 

because we believe that this guidance clarifies the 

existing rules that define and apply the term 

‘‘independent analysis.’’ 

award; (3) claimant’s information was 

never provided to or used by the staff 

handling the covered action or the 

underlying investigation (or 

examination), and those staff members 

otherwise had no contact with the 

claimant; (4) noncompliance with Rule 

21F–8(b),223 which requires an 

applicant to submit supplemental 

information that the Commission may 

require 224 and to enter into a 

confidentiality agreement; and (5) 

failure to specify in the award 

application the submission that the 

claimant made pursuant to Rule 21F– 

9(a) 225 upon which the claim to an 

award is based. In addition, the 

proposed rule would provide that other 

defective or non-meritorious award 

applications could be subject to the 

summary disposition process under 

appropriate circumstances. 

Under the proposed summary 

disposition process, the Office of the 

Whistleblower would issue a 

Preliminary Summary Disposition 

denying an application. This 

Preliminary Summary Disposition 

would be in lieu of the Preliminary 

Determination that the Claims Review 

Staff would issue under Rule 21F–10 or 

Rule 21F–11. A claimant would then 

have a 30-day period to reply with a 

written response explaining the grounds 

for contesting the denial. Failure to file 

a timely written response would 

constitute a failure to exhaust the 

administrative process and the 

Preliminary Summary Disposition 

would automatically become the final 

order with respect to that applicant’s 

award claim. If an applicant does file a 

timely response, the Office of the 

Whistleblower would consider the full 

record, including the applicant’s 

response (and any materials the 

applicant timely submitted therewith), 

and prepare a Proposed Final Summary 

Disposition to be provided to the 

Commission.226 Similar to the 

procedure under Rule 21F–10 and 21F– 

11, the Commission would have thirty 

(30) days to consider the Proposed Final 

Summary Disposition; if no 

Commissioner requests that the full 

Commission consider the Proposed 

Final Summary Disposition within the 

30-day period, it would become the 

final order of the Commission. If a 

Commissioner does request full 

Commission consideration, the 

Commission would consider the matter 

and issue a final order. The Office of the 

Whistleblower would then notify the 

claimant of the final order. 

If the Commission has received more 

than one award application for a 

particular matter, the Office of the 

Whistleblower could use the summary 

disposition process for any of those 

award applications that qualify, even if 

other of the applications are subjected to 

the regular consideration processes 

specified in Rules 21F–10 and 21F–11. 

Even in the multiple whistleblower 

context, we believe that there could be 

efficiencies in summarily considering 

and disposing of applications that 

constitute reasonably straightforward 

denials. For example, this could free up 

staff resources to concentrate on the 

meritorious claims or the more difficult 

determinations. Relatedly, to the extent 

that a claim is denied under the 

summary disposition process while 

other claims may remain pending under 

the Rule 21F–10 or Rule 21F–11 

process, this should allow the 

summarily denied claimant an earlier 

ability to exhaust his opportunities for 

judicial review.227 This, in turn, may 

potentially permit the Commission to 

more promptly pay any meritorious 

whistleblower on any award that may 

eventually result from the final order 

issued under the Rule 21F–10 or Rule 

21F–11 process.228

Finally, the proposed rule would 

clarify that Rule 21F–12,229 which 

governs the items that may be 

considered when the Commission 

entertains an award application under 

Rule 21F–10 or Rule 21F–11, applies in 

the context of summary dispositions. 

Specifically, the proposed rule would 

state that ‘‘[i]n considering an award 

determination pursuant to this rule, the 

Office of the Whistleblower and the 

Commission may rely upon the items 

specified in [Rule 21F–12(a)]. Further, 

[Rule 21F–12(b)] applies to summary 

dispositions.’’ 

Request for Comment 

35. We seek comments about the 

proposed summary disposition process, 

including whether the categories of 

award applications that would be 

eligible for summary disposition are 

appropriate, whether the proposal 

would afford claimants sufficient 

process, and whether there are any 

specific modifications that we should 

consider making to the proposed 

process. 

L. Technical Amendment to Rule 21F– 

4(c)(2) 230

We propose to amend Rule 21F– 

4(c)(2) 231 concerning the definition of 

information that led to a successful 

enforcement action because it contains 

an erroneous cross-reference. The 

reference is intended to be to Rule 21F– 

4(b)(5) regarding the definition of 

original source. The rule currently refers 

to paragraph (b)(4) of the section. 

III. Proposed Interpretive Guidance 

Regarding the Meaning and 

Application of ‘‘independent analysis’’ 

as Defined in Exchange Act Rule 21F– 

4(b)(3) 232

Two core requirements of the 

whistleblower award program are: (1) 

That the whistleblower must have 

provided ‘‘original information’’ to the 

Commission; and (2) that such 

information must have ‘‘led to’’ the 

successful enforcement of an action. 

Congress defined ‘‘original information’’ 

in relevant part as information that is 

derived from either a whistleblower’s 

‘‘independent knowledge’’ or the 

whistleblower’s independent 

‘‘analysis.’’ This guidance addresses the 

potential availability of a whistleblower 

award in cases where information 

provided by a whistleblower is not 

based on the whistleblower’s 


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233 76 FR 34300, 34311/3. 234 Id. at 34312/3. 235 Id. at 34311/3. We note that although publicly 

available information may not serve as the basis for 

an award, the provision of such information to the 

Commission can be an important public service. 

236 31 U.S.C. 3730. 

237See Proposed Rules for Implementing the 

Whistleblower Provisions of Section 21F of the 

Securities Exchange Act of 1934, Release No. 34– 

63237, 75 FR 70488, 70491 n.14 (Nov. 3, 2010) 

(noting that cases interpreting the qui tam 

provisions of the False Claims Act can provide 

helpful guidance in the interpretation of Section 

21F, though not necessarily controlling or 

authoritative in all circumstances). 

238See Graham County Soil and Water 

Conservation Dist. v. United States ex rel. Wilson, 

559 U.S. 280, 294 (2010) (explaining that, through 

the public disclosure bar, Congress sought ‘‘the 

golden mean between adequate incentives for 

whistle-blowing insiders with genuinely valuable 

information and discouragement of opportunistic 

plaintiffs who have no significant information to 

contribute of their own’’) (quoting, United States ex 

rel. Springfield Terminal Railway v. Quinn, 14 F.3d 

645, 649 (D.C. Cir. 1994)). 

239 31 U.S.C. 3730(4)(A). 

240Not all public sources of information implicate 

the public disclosure bar. The sources specified in 

the statute are a Federal criminal, civil, or 

administrative hearing in which the Government or 

its agent is a party; a congressional, Government 

Accountability Office, or other Federal report, 

hearing, audit, or investigation; or the news media. 

There is a limited exception for situations where 

the qui tam relator was an original source of the 

information. 31 U.S.C. 3730(e)(4)(A). 

241Although the term ‘‘original information’’ does 

not appear in the False Claims Act, courts have 

used the term to differentiate a qui tam relator’s 

own, independent information upon which an 

award may be based from information that is 

available in the designated public sources. See, e.g., 

United States ex rel. Colquitt v. Abbott Labs, 858 

F.3d 365, 374–75 (5th Cir. 2017); United States v. 

Walker, 438 F. A’ppx 885, 888 (11th Cir. 2011); 

United States ex rel. JDJ and Associates LLP v. 

Natixis, 2017 U.S. Dist. Lexis 164106, *33 (S.D.N.Y. 

2017). In United States ex rel. Marcus v. Hess, 317 

U.S. 537 (1943), a seminal False Claims Act case 

that prompted Congress to enact a forerunner of the 

public disclosure bar, the Court permitted a qui tam 

suit to proceed where the same defendants had 

been criminally indicted for the same conduct 

alleged in the qui tam action. In dissent, Justice 

Jackson termed it a ‘‘misuse of the statute’’ to 

permit an action where the averments in the 

complaint substantially copied the indictment and 

it was not shown that the petitioner ‘‘had any 

original information, that he added anything by 

investigations of his own, . . . .’’ 317 U.S. at 558 

(Jackson, J., dissenting). ‘‘Original information’’ as 

a term to describe information upon which an 

award may be based has been a part of various 

federal bounty statutes for more than 100 years. See, 

e.g., United States v. Simons, 7 F. 709 (E.D. Mich. 

1881) (discussing statute that permitted awards for 

‘‘original information concerning any fraud upon 

the customs revenue’’). 

242 15 U.S.C. 78u–6(a)(3)(C). These other sources 

are allegations made in a judicial or administrative 

hearing, or in a governmental report, hearing, audit, 

or investigation (unless the whistleblower is a 

source of the information). Further, we note that 

both the False Claims Act and the Internal Revenue 

Service whistleblower statute permit discretionary 

awards of up to 10% in the event that the 

government proceeds with a case based principally 

on public disclosures. See 31 U.S.C. 3730(d)(1); 26 

U.S.C. 7623(b)(2)(A). Congress did not include any 

similar discretionary award authority in Section 

21F. 

243 15 U.S.C. 78u–6(a)(3)(A). 

‘‘independent knowledge’’ but, instead, 

is premised on information derived 

from the whistleblower’s ‘‘independent 

analysis’’ of publicly available 

information. Such cases implicate both 

the scope of the independent analysis 

prong of the ‘‘original information’’ 

requirement and what is necessary for 

independent analysis to ‘‘lead to’’ the 

successful enforcement of an action. 

In formulating our views on how a 

whistleblower may satisfy the 

requirement of ‘‘original information’’ 

through the alternative of ‘‘independent 

analysis,’’ we have considered 

Congress’s and the Commission’s 

determinations to substantially restrict 

any role for publicly available 

information in potential whistleblower 

awards. When the Commission in 2011 

adopted the rules implementing the 

whistleblower program, it explained 

that paying awards for publicly 

available information was not consistent 

with Congress’s purpose in establishing 

the program. Specifically, the 

Commission stated that ‘‘Congress 

primarily intended our program ‘to 

motivate those with inside knowledge to 

come forward and assist the 

Government to identify and prosecute 

persons who have violated the securities 

laws[.]’ ’’ 233 The Commission further 

acknowledged that Congress sought to 

make awards available in cases where 

‘‘highly-probative, expert analysis of 

data . . . suggest[s] an important new 

avenue of inquiry, or otherwise 

materially advance[s] an existing 

investigation.’’ 234 But critically, the 

Commission made clear that, in its 

view, Congress did not intend to base 

awards ‘‘on information that is available 

to the general public.’’ 235

Independent Analysis Standard. 

Consistent with these understandings of 

congressional intent and consistent with 

the Commission’s views when it 

adopted the definition of ‘‘original 

information’’ in the original 

whistleblower rulemaking, we are 

proposing the following standard: In 

order to qualify as ‘‘independent 

analysis,’’ a whistleblower’s submission 

must provide evaluation, assessment, or 

insight beyond what would be 

reasonably apparent to the Commission 

from publicly available information. In 

assessing whether this requirement is 

met, the Commission would determine 

based on its own review of the relevant 

facts during the award adjudication 

process whether the violations could 

have been inferred from the facts 

available in public sources. While we 

recognize that this standard does not 

constitute a bright line, we believe that 

it should provide a solid foundation for 

the Commission to apply when 

assessing awards involving potential 

independent analysis. 

The Independent Analysis Must 

‘‘Lead to’’ the Success of the 

Enforcement Action. Even when this 

standard is met, however, a 

whistleblower’s independent analysis 

must still have ‘‘led to’’ a successful 

covered enforcement action. This 

standard requires an assessment of 

whether the whistleblower’s analysis— 

as distinct from the publicly available 

information on which the analysis was 

based—either (1) was a principal 

motivating factor in the staff’s decision 

to open its investigation, or (2) made a 

substantial and important contribution 

to the success of an existing 

investigation. 

In the sections that follow, we explain 

the relevant background and reasoning 

for the standards that we have set forth 

above. 

A. Background: ‘‘Original Information’’ 

and Publicly Available Information 

In formulating this guidance, we have 

considered the qui tam provisions of the 

False Claims Act,236 the federal 

government’s principal bounty statute 

and an important forerunner of the 

Commission’s whistleblower award 

authority.237 The False Claims Act 

requires that qui tam relators must 

provide their own, independent 

information—and not publicly available 

information—in order to avoid the socalled ‘‘public disclosure bar.’’ 238

Specifically, in its present form (and 

excluding one exception that is not 

relevant here 239), the public disclosure 

bar requires a court to dismiss a qui tam 

action ‘‘if substantially the same 

allegations or transactions as alleged in 

the action or claim were publicly 

disclosed’’ in certain designated 

sources.240

In Section 21F, Congress similarly 

limited awards to ‘‘original 

information’’—defining the term to 

require a whistleblower’s own, 

independent information rather than 

publicly available information.241 While 

not taking precisely the same approach 

as in the False Claims Act, Congress 

nonetheless required that ‘‘original 

information’’ for purposes of the 

Commission’s award program must not 

be exclusively derived from the news 

media or certain other public sources.242

Further, Congress affirmatively required 

that ‘‘original information’’ be derived 

from a whistleblower’s ‘‘independent 

knowledge or analysis.’’ 243 The Senate 

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244Public Law 111–203, section 922(a), 124 Stat. 

1376, 1841 (July 21, 2010). 

245See S. Rep. No. 111–176 at 111 (2010). The 

Senate Report stated: ‘‘ ‘Original information’ is 

defined as information that is derived from the 

independent analysis or knowledge of the 

whistleblower, and is not derived from an 

allegation in court or government reports, and is not 

exclusively from news media. In circumstances 

when bits and pieces of the whistleblower’s 

information were known to the media prior to the 

emergence of the whistleblower, and that for the 

purposes of the SEC enforcement the critical 

components of the information was supplied by the 

whistleblower, the intent of the Committee is to 

require the SEC to reward such person(s) in 

accordance with the degree of assistance that was 

provided.’’ 

246 17 CFR 240.21F–4(b)(2) (emphasis added). 

247For example, one commenter suggested that 

the Commission should exclude only information 

from sources such as news media and governmental 

reports that are specifically set forth in the statute. 

See Securities Whistleblower Incentives and 

Protections, Release No. 34–64545, 76 FR 34300, 

34311/3 (June 13, 2011) (citing comment letter from 

Taxpayers Against Fraud). 

248 Id. 

249 76 FR 34300, 34311/1. 

250 17 CFR 240.21F–4(b)(3). 

251 76 FR 34300, 34305, 34312/3. 

252 17 CFR 240.21F–4(b)(3). 

253See Merriam-Webster Dictionary, available at 

https://www.merriam-webster.com/dictionary/ 

reveal; Oxford English Dictionary, available at 

https://en.oxforddictionaries.com/definition/reveal; 

Cambridge Dictionary, available at http://

dictionary.cambridge.org/us/dictionary/english/ 

reveal; Black’s Law Dictionary (10th ed. 2014) 

(citing ‘‘to reveal’’ as one definition of ‘‘disclose’’); 

see also 15 U.S.C. 78u–6(h)(2)(A) (prohibiting the 

Commission or staff from disclosing information 

‘‘which could reasonably be expected to reveal the 

identity of a whistleblower. . . .’’) (emphasis 

added). 

254See S. Rep. No. 111–176 at 110 (2010) (citing 

to Markopolos’s testimony). 

255Markopolos also submitted a large amount of 

information that likely would have satisfied the 

‘‘independent knowledge’’ prong of ‘‘original 

information’’ under Rule 21F–4(b)(2), 17 CFR 

240.21F–4(b)(2). For example, he described his own 

firm’s inability to duplicate Madoff’s returns using 

the same strategy and provided information about 

Madoff’s claims and purported operations that he 

obtained from speaking with third parties who 

invested with Madoff. See Investigation of Failure 

of the SEC to Uncover Bernard Madoff’s Ponzi 

Scheme, Report No. OIG–509 (Aug. 31, 2009) (‘‘OIG 

Report’’), Exh. 137, available at https://

www.sec.gov/news/studies/2009/oig-509/oig-509_

exhibits.htm. 

Frank, which enacted Section 21F,244

explained Congress’s expectation that in 

order to obtain an award a 

whistleblower would be required to 

provide the ‘‘critical components’’ of 

information that supported an 

enforcement action beyond any 

information about the matter that was 

publicly available.245

In promulgating rules to implement 

the whistleblower program, the 

Commission further restricted any role 

for publicly available information in a 

potential whistleblower award. While 

Congress had defined ‘‘original 

information’’ as that which is derived 

from a whistleblower’s ‘‘independent 

knowledge’’ or ‘‘independent analysis,’’ 

Congress did not define either of these 

terms. The Commission’s definitional 

rules, however, effectively preclude 

awards merely for the submission of 

publicly available information. 

First, the Commission excluded 

publicly available information as a 

source of a whistleblower’s 

‘‘independent knowledge,’’ which the 

Commission defined as ‘‘factual 

information in [the whistleblower’s 

possession] that is not derived from 

publicly available sources.’’ 246 At the 

adopting stage for the whistleblower 

rules, the Commission considered 

comments that were critical of this 

blanket exclusion and that 

recommended some allowance for 

particular kinds of public 

information.247 The Commission 

rejected such an approach and chose to 

adopt the broad exclusion of any 

publicly available information that had 

been proposed.248 Moreover, the 

Commission interpreted ‘‘publicly 

available sources’’ expansively to 

include not only sources that are widely 

disseminated (such as corporate press 

releases and filings, media reports, and 

information on the internet), but also 

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).249

Second, in defining the term 

‘‘independent analysis,’’ the 

Commission permitted a whistleblower 

to employ publicly available 

information, but required that the 

whistleblower produce insights that are 

non-public, providing that independent 

analysis means an individual’s own 

analysis, whether done alone or in 

combination with others and analysis 

means an individual’s examination and 

evaluation of information that may be 

publicly available, but which reveals 

information that is not generally known 

or available to the public.250

Significantly, the Commission 

considered—and rejected—a suggestion 

that the proposed definition of 

‘‘independent analysis’’ be revised to 

permit an award to a whistleblower 

whose tip brings publicly available 

information to the staff’s attention: 

We believe that ‘‘independent analysis’’ 

requires that the whistleblower do more than 

merely point the staff to disparate publicly 

available information that the whistleblower 

has assembled, whether or not the staff was 

previously ‘‘aware of’’ the information. 

‘‘Independent analysis’’ requires that the 

whistleblower bring to the public 

information some additional evaluation, 

assessment, or insight.251

In setting forth the standard for 

‘‘independent analysis’’ in this 

guidance, we are particularly mindful 

that the appropriate standard should be 

sufficiently demanding that it would not 

undermine the clear exclusion of public 

information from the definition of 

‘‘independent knowledge.’’ Any other 

approach would, in our view, 

undermine the overall framework that 

was established by the Commission in 

2011 when it adopted the definitions of 

‘‘independent knowledge’’ and 

‘‘independent analysis.’’ 

B. ‘‘Independent Analysis’’ 

As noted, the Commission defined 

‘‘analysis’’ as the whistleblower’s 

‘‘examination and evaluation of 

information that may be publicly 

available, but which reveals information 

that is not generally known or available 

to the public.’’ 252 Thus, if a 

whistleblower submits publicly 

available information in a TCR and 

alleges a fraud or other securities 

violations on the basis of that 

information, the Commission must 

determine whether the whistleblower’s 

‘‘examination and evaluation’’ of the 

publicly available information 

‘‘reveal[ed]’’ the possible violations. 

To ‘‘reveal’’ means to make something 

known that was previously secret or 

hidden, or to open something up to 

view.253 Accordingly, to be considered 

‘‘analysis,’’ the whistleblower’s 

submission must include some insight— 

beyond the existence of the publicly 

available information—that is 

revelatory; that is, the whistleblower’s 

evaluation of the publicly available 

information should do the work of 

making known and opening up to view 

for the Commission the possible 

securities violations. 

As a principal illustration of how to 

apply our rule on ‘‘independent 

analysis,’’ we look to the model that 

Congress had before it at the time it 

enacted the whistleblower program; the 

work of Harry Markopolos in his efforts 

to expose Bernard Madoff’s Ponzi 

scheme.254 Among other things, 

Markopolos brought to bear his 

expertise as a certified fraud examiner 

and his knowledge of the options 

markets to demonstrate that Madoff’s 

purported investment strategy could not 

have produced his claimed investment 

returns.255 For example, in a 2000 

submission, beginning from the premise 

that Madoff purported to manage 

between $3 billion and $7 billion in 

assets pursuant to his ‘‘split-strike 

conversion’’ strategy, Markopolos 

explained that the strategy as described 


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256OIG Report, Exh. 134. 257OIG Report at 62, quoting Markopolos 2000 

submission, Exh. 134. 258OIG Report, Exh. 268. 259OIG Report, Exh. 268. 260 76 FR 34300, 34312/3. 261However, we caution that we expect this 

standard may be particularly demanding for 

attorneys and accountants who seek whistleblower 

awards based on their review of publicly available 

information. As the Enforcement staff is 

substantially comprised of experienced attorneys 

and accountants, an outside attorney or accountant 

would generally be expected to contribute insights 

or revelations that would not be reasonably evident 

to an accountant or attorney on the Enforcement 

staff who reviewed the same publicly available 

information. 

262See, e.g., United States ex rel. Oliver v. Philip 

Morris USA Inc., 826 F.3d 466, 471–73 (D.C. Cir. 

2016), reh. en banc denied, 2016 U.S. App. Lexis 

17161 (D.C. Cir. 2016); Amphastar Pharmaceuticals 

Inc. v. Aventis Pharma SA, 856 F.3d 696, 703 (9th 

Cir. 2017); Cause of Action v. Chicago Transit 

Authority, 815 F.3d 267, 278 (7th Cir. 2016), cert. 

denied, 137 S. Ct. 205 (2016). 

263Phillip Morris USA, 826 F.3d at 472; see also 

United States ex rel. Solis v. Millennium Pharms., 

Inc., 885 F.3d 623, 626 (9th Cir. 2018) (‘‘A prior 

disclosure and an allegation may be substantially 

similar when the prior public disclosure put the 

government ‘on notice to investigate the fraud 

before the relator filed his complaint.’’’). 

264United States ex rel. Shea v. Cellco 

Partnership, 863 F.3d 923, 935 (DC Cir. 2017). 

265 Id. at 933 (quoting United States ex rel. 

Springfield Terminal Railway v. Quinn, 14 F.3d 

645, 653 (D.C. Cir. 1994)). 266For example, non-experts may configure 

publicly available information in a non-obvious 

way that reveals patterns indicating possible 

violations that would not be otherwise inferable 

from the public information or may engage in 

highly probative calculations or some other 

meaningful exercise with the information that may 

demonstrate the possibility of securities violations. 

in public materials ‘‘would require lots 

of options trading and lots of options in 

open interest’’ 256 for hedging purposes. 

Based upon his calculations of the total 

value of call option open interest on the 

Chicago Board Option Exchange and of 

OEX put option open interest, 

Markopolos revealed that ‘‘‘hedging 

cannot be taking place as described. 

. . . [I]f only $3 billion are allocated to 

this strategy then there still aren’t 

enough options in open interest for this 

type of hedging to occur, since Madoff 

would be at least 1⁄3 of the open interest 

and we know that is not the case.’ ’’ 257

Similarly, in a 2005 submission, 

Markopolos offered a specific 

mathematical illustration of how he 

believed the income and protection 

parts of Madoff’s strategy would be 

expected to function under real-world 

market conditions, arguing that the 

income that might be expected from 

stock dividends and the sale of equity 

call options offset by the cost of 

purchasing put options, made Madoff’s 

claimed returns ‘‘way too good to be 

true.’’ 258 In the same submission, 

Markopolos also calculated that Madoff 

would have had to account for more 

than 100% of the total OEX put option 

open interest in order to hedge his stock 

holdings as depicted in certain 

marketing literature.259

Markopolos’s submissions included 

information that would qualify as 

‘‘independent analysis’’ as defined in 

our whistleblower rules (and explained 

further in this guidance) if submitted 

today. Markopolos’s information was 

‘‘highly-probative,’’ 260 going beyond the 

publicly available information itself to 

‘‘reveal’’ that Madoff’s claimed returns 

were unachievable under real market 

conditions. We anticipate that we may 

find a requisite level of ‘‘analysis’’ in 

analogous cases where an individual 

with a high level of specialized training 

or expertise reviews publicly available 

information and illuminates for the 

Commission possible violations that are 

obscured because of the technical nature 

of the source material.261

Importantly, this is not to suggest that 

‘‘independent analysis’’ is limited to 

persons with technical expertise or 

other specialized training. In each case, 

the touchstone is whether the 

whistleblower’s submission is 

revelatory in utilizing publicly available 

information in a way that goes beyond 

the information itself and affords the 

Commission with important insights or 

information about possible violations. 

While ‘‘independent analysis’’ is 

evident in Markopolos’s tips, other 

submissions that utilize publicly 

available information may not be so 

clear. However, we believe that case law 

interpreting the False Claims Act’s 

public disclosure bar generally suggests 

a helpful framework for distinguishing 

tips in which the whistleblower’s 

‘‘independent analysis’’ of publicly 

available information reveals important 

information about possible violations 

beyond the public sources themselves. 

The public disclosure bar precludes 

recovery when ‘‘substantially the same 

allegations or transactions’’ as alleged 

by the qui tam relator were previously 

disclosed publicly in one of the 

designated sources. The D.C. Circuit and 

other federal courts of appeals have held 

that fraudulent transactions are publicly 

disclosed—and a qui tam suit thus 

barred—when essential facts that are 

sufficient to give rise to an inference of 

fraud are in the public domain.262 This 

rule bars qui tam suits when publicly 

disclosed information provides ‘‘the 

government . . . [with] enough 

information ‘to investigate the case and 

to make a decision whether to 

prosecute’ or . . . ‘could at least have 

alerted law-enforcement authorities to 

the likelihood of wrongdoing.’ ’’ 263

Conversely, where a qui tam relator 

‘‘supplie[s] the missing link between the 

public information and the alleged 

fraud,’’ and thereby ‘‘ ‘bridge[s] the gap 

by [his] own efforts and experience,’ the 

public disclosure bar does not 

apply.’’ 264 In this way, qui tam awards 

are reserved for relators who 

‘‘ ‘contributed significant independent 

information’ about a possible fraud.’’ 265

Relying in part on the False Claims 

Act framework to assist us in 

formulating a proposed standard for 

interpreting Exchange Act Rule 21F– 

4(b)(3), we believe the following is 

appropriate: A whistleblower’s 

examination and evaluation of publicly 

available information does not 

constitute ‘‘analysis’’ if the facts 

disclosed in the public materials on 

which the whistleblower relies and in 

other publicly available information are 

sufficient to raise an inference of the 

possible violations alleged in the 

whistleblower’s tip. This is because, 

where the violations that the 

whistleblower alleges can be inferred by 

the Commission from the face of public 

materials, those violations are not 

‘‘reveal[ed]’’ to the Commission by the 

whistleblower’s tip or any purported 

analysis that the whistleblower has 

submitted. Rather, in order for a 

whistleblower to be credited with 

providing ‘‘independent analysis,’’ the 

whistleblower’s examination and 

evaluation should contribute 

‘‘significant independent information’’ 

that ‘‘bridges the gap’’ between the 

publicly available information and the 

possible securities violations. 

As noted, ‘‘significant independent 

information’’ that ‘‘bridges the gap’’ in 

revealing violations may be found in the 

application of technical expertise, but 

this is not required.266 However, we 

have received tips in which a 

whistleblower merely offers 

observations drawn from publicly 

available information. In these cases, the 

whistleblower typically directs the staff 

to publicly available information and 

states that the information itself suggests 

a fraud or other violations. Examples 

would be where the whistleblower 

points to common hallmarks of fraud on 

the face of the public materials (e.g., 

impossibly high, guaranteed investment 

returns or extravagant claims in press 

releases) or to public discourse (e.g., 

discussions on a public message board) 

in which investors or others are alleging 

a fraudulent scheme. Further, it would 

not matter whether the individual relied 

on only one source (e.g., a single 

website) to collect the publicly available 

information that demonstrates the 


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267As noted above, we explained in the adopting 

release for our whistleblower rules that a 

whistleblower would need to do more than point 

us to disparate public information in order to 

provide ‘‘independent analysis’’ within the 

meaning of our rule. 76 FR 34300, 34305, 

34312/3. 268The Commission, in its adjudicatory capacity, 

routinely draws reasonable inferences from facts in 

the record. See, e.g., SEC Rule of Practice 250, 17 

CFR 201.250 (drawing reasonable inferences from 

factual allegations in deciding dispositive motions). 

‘‘Drawing inferences from direct and circumstantial 

evidence is a routine and necessary task of any 

factfinder. ‘The very essence of [the factfinder’s] 

function is to select from among conflicting 

inferences and conclusions that which it considers 

most reasonable.’ ’’ Siewe v. Gonzalez, 480 F.3d 

160, 166 (2d Cir. 2007) (quoting Tennant v. Peoria 

and Pekin Union Railway, 321 U.S. 29 (1944)). 

269See 17 CFR 240.21F–10(e). 

270 76 FR 34300, 34312/3. This would require that 

the whistleblower’s analysis made a substantial and 

important contribution to the action. See 

Whistleblower Award Proceeding 2016–9, Release 

No. 34–77833 (May 13, 2016). 

271 75 FR 70488, 70497/2. 

272For example, could we propose and adopt a 

rule that would authorize the Commission on a 

discretionary basis to utilize the IPF to pay awards 

to whistleblowers who make significant 

contributions in Commission Enforcement actions 

that do not qualify as covered actions for which we 

can currently pay awards? 

273These would be situations where, under the 

existing statute and our current rules, the 

information provided by the whistleblower would 

not qualify as information that was derived from the 

whistleblower’s ‘‘independent knowledge’’ or 

independent analysis,’’ see Exchange Act Rule 21F– 

4(b)(2) & (3), 17 CFR 240.21F–4(b)(2) & (3), and thus 

would not be ‘‘original information’’ upon which 

the Commission could base an award, see Exchange 

Act Rule 21F–4(b)(1)(i), 17 CFR 240.21F–4(b)(1)(i). 

hallmarks of the fraud, or whether the 

individual relied on a multitude of 

different publicly available sources to 

collect the information. These tips 

generally would not qualify as 

‘‘independent analysis’’ under our 

interpretation because the 

whistleblower’s essential contribution is 

merely that he or she directed the staff 

to publicly available information that 

gives rise to an inference of violations; 

the whistleblower’s tip has not ‘‘bridged 

the gap’’ between public information 

that does not itself provide a basis for 

inferring a possible violation and a 

conclusion that a violation may have 

occurred. Further, we believe that this 

same result would generally obtain 

whether the whistleblower directs the 

staff to a single piece of publicly 

available information or the 

whistleblower aggregates information 

from multiple different sources.267 If the 

violations can be inferred by the 

Commission from the available and/or 

assembled publicly available 

information, without more, then the 

whistleblower has not contributed 

significant independent information 

that reveals the violations.268

Thus, in each case the Commission 

should consider whether publicly 

available information (both that 

supplied by the whistleblower and other 

public sources) was sufficient to give 

rise to an inference of the violations 

alleged by the whistleblower, or 

whether the whistleblower’s 

examination and evaluation of public 

source material revealed new, 

significant, and independent 

information that ‘‘bridged the gap’’ for 

the staff in demonstrating the possibility 

of violations. Moreover, under our rules 

the whistleblower will be notified of 

any preliminary determination that his 

or her tip did not constitute 

‘‘independent analysis,’’ and will have 

an opportunity to contest that 

determination in a written submission 

to the Commission.269

C. Leads to Successful Enforcement 

Assuming that a whistleblower’s 

submission meets the threshold 

requirement that it constitute 

‘‘independent analysis,’’ for the 

whistleblower to be eligible for an 

award the ‘‘information that . . . is 

derived from the . . . [whistleblower’s] 

analysis’’ must also lead to a successful 

enforcement action. This determination 

turns ‘‘on an evaluation of whether the 

analysis is of such high quality that it 

either causes the staff to open an 

investigation, or significantly 

contributes to a successful enforcement 

action, as set forth in Rule 21F–4(c).’’ 270

Further, if the staff looks to other 

information as well in determining to 

open an investigation, the Commission 

will only find that the independent 

analysis ‘‘led to’’ the success of the 

enforcement action if the Commission 

determines that the whistleblower’s 

analysis was a ‘‘principal motivating 

factor’’ in the staff’s decision to open the 

investigation.271

Thus, even an otherwise compelling 

analysis may not satisfy the ‘‘leads to’’ 

requirement depending on the nature of 

other information already in the staff’s 

possession. For example, if the staff has 

already obtained testimony from 

insiders describing the facts of a 

violation, a subsequent whistleblower 

submission that demonstrates the 

possibility of the violation through 

independent analysis of publicly 

available information would not likely 

qualify for an award because, against the 

backdrop of the facts already known to 

the staff, the whistleblower’s analysis 

would not significantly contribute to the 

staff’s investigation. 

Request for Comment 

30. We seek comment on the 

interpretation of ‘‘independent 

analysis’’ in light of the background set 

forth above. Are there additional 

considerations that the Commission 

should factor into the interpretation? 

For example, should the interpretation 

address more explicitly cases in which 

an individual selects, compiles, and 

presents publicly available information 

in a new way for the staff? If so, how? 

31. Should any aspect of the 

interpretation be codified in rule text? 

For example, should the Commission 

adopt rule text that would make clear 

that for a whistleblower to be credited 

with providing ‘‘original information’’ 

through ‘‘independent analysis,’’ the 

whistleblower’s examination and 

evaluation should contribute 

‘‘significant independent information’’ 

that ‘‘bridges the gap’’ between the 

publicly available information and the 

possible securities violations? 

IV. Request for Comment Regarding a 

Potential Discretionary Award 

Mechanism for Commission Actions 

That Do Not Qualify as Covered 

Actions, Involve Only a De Minimis 

Collection of Monetary Sanctions, or 

Are Based on Publicly Available 

Information 

Beyond the specific rule proposals 

and interpretations expressly advanced 

above, we invite public comment on 

whether the Commission could at a 

future point propose a rule that would 

permit the Commission on a 

discretionary basis to pay awards to 

whistleblowers in Commission 

enforcement actions that do not result in 

an order for monetary sanctions that 

exceeds $1,000,000 272 or enforcement 

actions where the whistleblower’s tip 

consisted of publicly available 

information.273 Similarly, do we have 

the statutory authority to propose and 

adopt a rule that would permit the 

Commission on a discretionary basis to 

make award payments that are not tied 

to the monetary payments collected 

where a meritorious whistleblower has 

received an award determination in a 

covered action, but the ordered 

monetary sanctions cannot be collected 

or the amount collected would result in 

a de minimis payment? Alternatively, 

would a legislative change be required 

for the Commission to establish the type 

of discretionary award mechanisms 

described in this section? Moreover, 

whether by rule or legislative change, 

would such discretion to make awards 

in these instances be in the public 

interest? Please explain the grounds for 

your views. 

V. General Request for Public Comment 

We request and encourage any 

interested person to submit comments 


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274 44 U.S.C. 3501 et seq. 

275 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

276See Exchange Act Rule 21F–9, 17 CFR 240– 

21F–9(a). 277 17 CFR 240.21F–8. 

on any aspect of the proposed rule 

amendments, interpretations, or other 

items specified above. With respect to 

any comments on the economic analysis 

contained below, we note that such 

comments would be of greatest 

assistance to our rulemaking initiative if 

accompanied by supporting data and 

analysis of the issues addressed therein 

and by alternatives to our proposals 

where appropriate. 

Finally, other than the items 

specifically identified in this release, 

persons wishing to comment are 

expressly advised that the Commission 

is not proposing any other changes to 

the whistleblower program rules (i.e., 

Exchange Act Rules 21F–1 through 21F– 

17), nor is the Commission otherwise 

reopening any of those rules for 

comment. 

VI. Paperwork Reduction Act 

A. Background 

The proposed amendments would 

affect certain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’).274 The 

Commission is submitting the proposal 

to the Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

the PRA.275 The titles for the affected 

collections of information are: 

‘‘Electronic Data Base Collection 

System—TCR’’ (OMB Control No. 3235– 

0672); and ‘‘Form TCR’’ and 

‘‘Form WB–APP’’ (OMB Control No. 

3235–0686). 

Currently an applicant seeking to 

submit information to the Commission 

in order to qualify as a whistleblower 

must submit this information by using 

one of two methods: (1) By providing 

the information through an online portal 

on the Commission’s website that is 

designed for receiving electronic 

submissions, or (2) by submitting the 

paper Form TCR that was initially 

adopted by the Commission as part of 

the original whistleblower rulemaking 

in 2011.276 In addition to the paper 

Form TCR, the Commission also 

adopted a paper Form WB–APP when it 

adopted the existing rules for the 

whistleblower program. Individuals 

seeking awards must make their award 

request using Form WB–APP. The hours 

and costs associated with preparing and 

submitting information through the 

online portal and affected forms 

constitute reporting and cost burdens 

imposed by each collection of 

information. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information requirement unless it 

displays a currently valid OMB control 

number. 

B. Summary of the Proposed 

Amendments 

As described in more detail above, to 

provide the Commission with the ability 

to make timely corresponding 

adjustments to the paper Form TCR 

when it determines to modify the online 

portal, the Commission proposes to 

modify Exchange Act Rule 21F–8 277 by 

adding a new paragraph (d)(1) providing 

that the Commission will periodically 

designate a Form TCR (Tip, Complaint, 

or Referral) that individuals seeking be 

eligible for an award through the 

process identified in § 240.21F–9(a)(2) 

shall use. In addition, to provide the 

Commission with greater administrative 

flexibility to modify Form WB–APP, the 

Commission proposes to modify 

Exchange Act Rule 21F–8 by adding a 

new paragraph (d)(2) providing that the 

Commission will also periodically 

designate a Form WB–APP for use by 

individuals seeking to apply for an 

award under either § 240.21F–10 or 

§ 240.21F–11. 

In connection with these proposed 

amendments, we propose to reorganize 

the OMB control numbers and 

associated burden estimates for the 

collections of information contained in 

the Commission’s online portal, Form 

TCR and Form WB–APP. Although the 

online portal and Form TCR collect 

substantially the same type of 

information—information alleging 

potential securities law violations—they 

currently have separate OMB control 

numbers. In addition, although Form 

TCR and Form WB–APP collect 

different types of information, the latter 

of which collects information from 

individuals applying for whistleblower 

awards, these collections of information 

are currently gathered pursuant to the 

same OMB control number. 

Pursuant to the proposed 

reorganization, both the online portal 

and Form TCR would fall under the 

same OMB control number (No. 3235– 

0672). The title for this collection of 

information and the associated burden 

estimate would be adjusted accordingly 

to reflect the submission of relevant 

information through both the online 

portal and the paper Form TCR (see 

Table 2 of section VI(C)). Form WB–APP 

would this have its own OMB control 

number (No. 3235–0686) and the 

collection of information would be 

retitled accordingly (see Table 2 of 

section VI(C)). 

C. Burden and Cost Estimates Related to 

the Proposed Amendments 

We do not anticipate that the 

proposed amendments would increase 

the burden or cost to individuals 

preparing and submitting the required 

information through the online portal 

and affected forms. Although we intend 

to make certain modifications to Form 

TCR so that the information elicited by 

the form is consistent with the 

information collected through the 

online portal, we do not believe that 

these conforming modifications will 

increase appreciably the burden for 

individuals completing the form. 

We estimate that the combined 

burden associated with both paper Form 

TCR and the online complaint form is 

9,050 hours annually. We anticipate that 

the burdens imposed by the online 

complaint form will vary depending on 

the complexity of the alleged violations 

that are the subject of the tip and the 

amount of information possessed by the 

individual submitting the tip. We 

estimate that it takes a complainant, on 

average, 30 minutes to complete the 

online complaint form. Based on an 

estimate of 16,000 annual responses, we 

estimate that the annual PRA burden for 

the online complaint form is 8,000 

hours. Although the completion time 

will depend on the complexity of the 

alleged violation and the amount of 

information the whistleblower possesses 

in support of the allegations, we 

estimate that it takes a whistleblower, 

on average, one and one-half hours to 

complete and submit Form TCR. We 

estimate that it may take individuals 

more time to complete Form TCR than 

the online complaint form because a 

person will have to hand write in the 

required information and spend time 

mailing and faxing the form to the 

Commission. Based on the receipt of an 

average of approximately 700 annual 

Form TCR submissions for the past 

three fiscal years, the Commission 

estimates that the annual reporting 

burden of Form TCR is 1,050 hours. 

We estimate that it takes a 

whistleblower, on average, one hour to 

complete Form WB–APP, though the 

completion time depends largely on the 

complexity of the alleged violation and 

the amount of information the 

whistleblower possesses in support of 

his or her application for an award. 

Based on the receipt of an average of 

approximately 110 annual properly filed 

Form WB–APP submissions for the past 


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278This figure does not include Form WB–APP 

submissions which were facially deficient, 

subsequently withdrawn or submitted by 

individuals who have been barred by the 

Commission from participation in the 

whistleblower program. 

279This estimate is based, in part, on the 

Commission’s belief that most whistleblowers likely 

will not retain counsel on an hourly basis to assist 

them in preparing the forms. 

280 Individuals submitting their information in 

writing who are not seeking to be eligible for the 

Commission’s whistleblower award program are not 

required to retain an attorney, even if they choose 

to submit their information anonymously, and thus 

are not required to use either the Form TCR or the 

Form WB–APP. As such, for purposes of calculating 

the estimated costs of the forms, we have only 

included the potential costs associated with 

completing and submitting the Form TCR and Form 

WB–APP. 

281These amounts are based on the assumption, 

as noted above, that no more than 5% of all 

whistleblowers will be represented by counsel 

pursuant to an hourly fee arrangement. 

282The Commission uses this hourly billing rate 

for purposes of estimating the professional costs of 

other rules, and we believe it is an appropriate 

billing rate to use in this context, recognizing that 

some attorneys representing whistleblowers may 

not be securities lawyers and may charge different 

average hourly rates. 

283The 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, we estimate 

that, on average, counsel will bill a whistleblower 

three hours for the completion of Form TCR and 

two hours for completion of Form WB–APP (even 

though we estimate that a whistleblower acting 

without counsel will be able to complete the Form 

TCR in 1.5 hours and Form WB–APP in 1 hour). 

284 35 × ($400 × 3) = $42,000. 

285 6 × ($400 × 2) = $4,800. 

six fiscal years,278 the Commission 

estimates that the annual reporting 

burden of Form WB–APP is 110 hours. 

We do not believe that the proposed 

amendments would increase the 

professional costs associated with 

preparing and submitting the affected 

forms. Under the whistleblower rules, 

an anonymous whistleblower who is 

seeking an award is required, and a 

whistleblower whose identity is known 

may elect, to retain counsel to represent 

the whistleblower in the whistleblower 

program. We expect that in most 

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. However, we expect 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 be paid 

for the representation through a fixed 

percentage of any recovery by the 

whistleblower under the program. Thus, 

we expect most whistleblowers will not 

incur any direct out of pocket expenses 

for attorneys’ fees for the completion of 

the affected forms. 

We expect that a very small number 

of whistleblowers (no more than 5%) 

enter into hourly fee arrangements with 

counsel.279 In those cases, a 

whistleblower will incur direct 

expenses for attorneys’ fees for the 

completion of the required forms. To 

estimate those expenses,280 we make the 

following assumptions: 

(i) The Commission will continue to 

receive on average approximately 700 

Forms TCR and 110 Forms WB–APP 

annually; 

(ii) Individuals will pay hourly fees to 

counsel for the submission of 

approximately 35 Forms TCR and 6 

Forms WB–APP annually; 281

(iii) Counsel retained by 

whistleblowers pursuant to an hourly 

fee arrangement will charge on average 

$400 per hour; 282 and 

(iv) Counsel will bill on average: (i) 

Three hours to complete a Form TCR, 

and (ii) two hours to complete a Form 

WB–APP.283

For purposes of the PRA, we estimate 

that each year whistleblowers will incur 

the following total amounts of attorneys’ 

fees in connection with completing 

Forms TCR and WB–APP: (i) $42,000 284

for the reporting burden of Form TCR; 

and (ii) $4,800 285 for the reporting 

burden of Form WB–APP. 

The tables below summarize the 

burden and cost estimates associated 

with the online portal and affected 

forms both currently and after the 

proposed reorganization of the relevant 

control numbers: 

TABLE 1 OF SECTION VI(C)—CURRENT BURDEN ESTIMATES

Title OMB control 

No. Burden hours Costs 

‘‘Electronic Data Base Collection System—TCR’’ ....................................................................... 3235–0672 8,000 $0 

‘‘Form TCR’’ and ‘‘Form WB–APP’’ ............................................................................................. 3235–0686 1,160 46,800 

TABLE 2 OF SECTION VI(C)—REVISED BURDEN ESTIMATES UNDER THE PROPOSED REORGANIZATION

Title OMB control 

No. Burden hours Costs 

‘‘Tips, Complaints and Referrals (TCR)’’ ..................................................................................... 3235–0672 9,050 $42,000 

‘‘Form WB–APP’’ ......................................................................................................................... 3235–0686 110 4,800 

D. Mandatory Collection of Information 

A whistleblower is required to 

complete either a hardcopy Form TCR 

or submit his or her information 

electronically through the online portal 

and to complete Form WB–APP to 

qualify for a whistleblower award. 

E. 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 

the Commission and any officer or 

employee of the Commission shall not 

disclose any information, including 

information provided by a 

whistleblower to the Commission, 

which could reasonably be expected to 

reveal the identity of a whistleblower, 

except in accordance with the 

provisions of section 552a of title 5, 

United States Code, unless and until 

required to be disclosed to a defendant 

or respondent in connection with a 

public proceeding instituted by the 

Commission or certain specific entities 

listed in paragraph (C) of Section 

21F(h)(2). 

Further, as discussed above, we are 

proposing Rule 21F–2(c) to require that 

an individual who is seeking this 

heightened confidentiality protection 

must submit his or her information to 

the Commission using the online portal 

or by completing a hardcopy Form TCR. 

If an individual fails to do so, then 


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286 15 U.S.C. 78w(a)(2). 

287 15 U.S.C. 78c(f). 

288 138 S. Ct. 767 (2018). 

under our proposed rule he or she 

would be ineligible for the heightened 

confidentiality protections. 

Section 21F(h)(2) also permits 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 and still be eligible for an 

award, so long as the whistleblower is 

represented by counsel. However, the 

statute provides that a whistleblower 

must disclose his or her identity prior 

to receiving payment of an award. 

F. Request for Comment 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

we request comment in order to: 

• Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of our 

assumptions and estimates of the 

burden of the proposed collection of 

information; 

• Determine whether there are ways 

to enhance the quality, utility, and 

clarity of the information to be 

collected; 

• Evaluate whether there are ways to 

minimize the burden of the collection of 

information on those who respond, 

including through the use of automated 

collection techniques or other forms of 

information technology; and 

• Evaluate whether the proposed 

amendments would have any effects on 

any other collection of information not 

previously identified in this section. 

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing these 

burdens. Persons submitting comments 

on the collection of information 

requirements should direct their 

comments to the Office of Management 

and Budget, Attention: Desk Officer for 

the U.S. Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, and send a copy to, Brent J. 

Fields, Secretary, U.S. Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549, with reference 

to File No. S7–08–17. Requests for 

materials submitted to OMB by the 

Commission with regard to the 

collection of information should be in 

writing, refer to File No. S7–08–17 and 

be submitted to the U.S. Securities and 

Exchange Commission, Office of FOIA 

Services, 100 F Street NE, Washington, 

DC 20549. OMB is required to make a 

decision concerning the collection of 

information between 30 and 60 days 

after publication of this proposed rule. 

Consequently, a comment to OMB is 

best assured of having its full effect if 

the OMB receives it within 30 days of 

publication. 

VII. Economic Analysis 

The Commission is sensitive to the 

economic consequences of its rules, 

including the benefits, costs, and effects 

on efficiency, competition, and capital 

formation. Section 23(a)(2) 286 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 287

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. 

The economic analysis in this part 

focuses on the proposed amendments to 

Rule 21F–2, Rule 21F–4(d)(3), Rule 

21F–6, Rule 21F–3(b)(4), Rule 21F–8, 

newly proposed Exchange Act Rule 

21F–18, and the proposed interpretive 

guidance. As discussed above, the 

proposed amendments to Rule 21F–2 

are in response to the Supreme Court’s 

recent decision in Digital Realty Trust, 

Inc. v. Somers; 288 proposed Rule 21F– 

4(d)(3) would allow awards based on 

non-prosecution agreements or deferred 

prosecution agreements entered into by 

the DOJ or state attorneys general, and 

settlement agreements entered into by 

the Commission; proposed Rule 21F– 

3(b)(4) would eliminate potential double 

recovery under the current definition of 

related action; proposed amendments to 

Rule 21F–6 would allow additional 

considerations for small and large 

awards; proposed Rule 21F–8(e) would 

provide authority to bar applicants from 

future award applications in certain 

limited situations; proposed Rule 21F– 

18 would provide a streamlined award 

consideration process for certain limited 

categories of non-meritorious 

applications; and the proposed 

interpretive guidance would help clarify 

the meaning of ‘‘independent analysis’’ 

as that term is defined in Exchange Act 

Rule 21F–4 and utilized in the 

definition of ‘‘original information.’’ 

The other proposed amendments in this 

release are either procedural, technical 

in nature or codify existing practice, and 

therefore we do not expect them to 

significantly impact efficiency, 

competition, and capital formation. 

Many of the benefits and costs 

discussed below are difficult to 

quantify. For example, although the 

analysis that follows details the specific 

ways in which we expect the proposed 

rules to affect whistleblower incentives, 

we lack the data necessary to estimate 

the magnitudes of these effects 

separately or in the aggregate. Similarly, 

we do not know the precise cost—in 

terms of awards paid out of the IPF—of 

defining a non-prosecution agreement or 

deferred prosecution agreement entered 

into by the DOJ or a state attorney 

general or a settlement agreement 

entered into by the Commission as an 

‘‘administrative action’’ and any money 

required to be paid thereunder as a 

‘‘monetary sanction.’’ Moreover, we do 

not know the funds that might be 

conserved in the IPF by the avoidance 

of double recoveries for the same action 

and the avoidance of large awards that 

are not reasonably necessary to achieve 

the goals of the whistleblower program. 

Therefore, while we have attempted to 

quantify economic impacts where 

possible, much of the discussion of 

economic effects is qualitative in nature. 

A. Economic Baseline 

To examine the potential economic 

effects of the amendments, we employ 

as a baseline the comprehensive set of 

rules that the Commission adopted in 

May 2011 to implement the 

whistleblower program. The baseline 

also includes: The Supreme Court’s 

recent decision in Digital Realty Trust, 

Inc. v. Somers; a description of 

whistleblower programs administered 

by other regulatory authorities; and a 

discussion of the IPF (including its 

replenishment mechanism), summary 

statistics that describe the distribution 

of awards paid by the whistleblower 

program under the 2011 rules, and 

estimates of wages and salaries obtained 

from a number of surveys. 


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289Although we discuss several federal 

whistleblower programs that we believe are more 

likely to be implicated by the proposed rules, there 

are other federal whistleblower programs that are 

not discussed but which could potentially be 

implicated. 290 7 U.S.C. 26. 291See Securities Whistleblower Incentives and 

Protections Proposing Release, 75 FR at 70490. 292Utah Code Annotated 61–1–101 et seq. 293 Indiana Code 23–19–7–1 et seq. 294 26 U.S.C. 7623. 295 49 U.S.C. 30172 (enacted by Section 24352 of 

the Fixing America’s Surface Transportation Act of 

2015 (FAST Act), Pub. L. 114–94). 296 138 S. Ct. 767 (2018). 297 Id. at 781–82. 298 Id. 299 Id. at 777 (quoting S. Rep. No. 111–176, at 38 

(2010)). 

300However, the Commission is required to 

request and obtain an annual apportionment from 

the Office of Management and Budget to use these 

funds. See SEC Agency Financial Report for 2017 

(Nov. 14, 2017), available at https://www.sec.gov/ 

files/sec-2017-agency-financial-report.pdf. 

301See Section II.D, above. 

302See 15 U.S.C. 78u–6(g)(3). 

303For a description of the IPF’s statutory 

replenishment mechanisms, see Section 21F(g)(3) of 

the Exchange Act, 15 U.S.C. 78u–6(g)(3). 

304These totals treat as single awards several 

cases where whistleblowers’ original information 

led to multiple covered actions that were processed 

together in one award order recognizing the total 

contributions of the whistleblower. Similarly, 

consistent with the approach proposed above 

governing cases where we grant an award for both 

a Commission enforcement action and a related 

action by another agency based on the same 

information provided by the whistleblower (see 17 

CFR 240.21F–3(b)), we consider covered-action 

awards together with their corresponding relatedaction awards as single whistleblower awards. 

305One of the three awards that exceeded $30 

million was issued in September 2014 in a 

Commission action and related actions. See Order 

Determining Whistleblower Award Claim, Exchange 

Act Release No. 34–73174 (Sept. 22, 2014), 

available at https://www.sec.gov/rules/other/2014/ 

34-73174.pdf. The other two awards were issued in 

March 2018 for $49 and $33 million, respectively, 

to three individuals (two of whom were acting as 

joint whistleblowers). See Order Determining 

Whistleblower Award Claim, Exchange Act Release 

No. 34–82897 (March 19, 2018), available at, 

https://www.sec.gov/rules/other/2018/34-82897.pdf. 

We note that these three awards alone reduced the 

balance of the IPF by approximately $112 million. 

1. Whistleblower Programs 

In this section, we discuss a nonexhaustive list of the various federal and 

state whistleblower programs that are 

currently administered by other 

agencies or authorities and which might 

be implicated by the proposed rules.289

The CFTC administers its own 

whistleblower award program under 

section 23 of the Commodity Exchange 

Act.290 Both the SEC and CFTC 

programs were established by the DoddFrank Act and are substantially 

identical in their substantive terms.291

As discussed above, since the adoption 

of our whistleblower program rules, two 

states have adopted their own 

whistleblower award programs in 

connection with state securities-law 

enforcement actions. In 2011, Utah 

established a whistleblower-award 

scheme to provide rewards of up to 

thirty percent of the money collected in 

state securities-law enforcement 

actions.292 The following year, Indiana 

enacted a whistleblower award scheme 

to provide rewards up to ten percent of 

the money collected in a state securitieslaw enforcement action.293 We are also 

aware that DOJ might pursue lawenforcement actions that potentially 

implicate both the Commission’s 

whistleblower program and the 

whistleblower award program that the 

IRS administers.294 Further, Congress in 

2015 established a new motor-vehiclesafety whistleblower award program 

that allows employees or contractors of 

a motor-vehicle manufacturer, parts 

supplier, or dealership who report 

serious violations of federal vehiclesafety laws to obtain awards of 10 

percent to 30 percent of any monetary 

sanction over $1 million that the 

Federal Government collects based on 

that information.295

2. Supreme Court Decision in Digital 

Realty Trust, Inc. v. Somers 

The Supreme Court recently held in 

Digital Realty Trust, Inc. v. Somers,296

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

Act unambiguously requires that a 

person report a possible securities law 

violation to the Commission in order to 

qualify for employment retaliation 

protection, and that the Commission’s 

rule interpreting the retaliation 

protections in Section 21F more broadly 

was therefore not entitled to 

deference.297 The Court reasoned that 

the definition of ‘‘whistleblower’’ 

codified in Section 21F(a)(6) requires 

such a report to the Commission as a 

prerequisite for employment retaliation 

protection, and that this definition is 

‘‘clear and conclusive.’’ 298 The Court 

also determined that strict application 

of the definition’s reporting requirement 

in the employment anti-retaliation 

context is consistent with Congress’s 

core objective of ‘‘ ‘motivat[ing] people 

who know of securities law violations to 

tell the SEC.’ ’’ 299

3. IPF and Awards Issued by the SEC 

Whistleblower Program 

In Section 21F(g) of the Exchange Act, 

Congress established the IPF to provide 

funding for the payment of 

whistleblower awards. The IPF has a 

permanent indefinite appropriation that 

is available without further 

appropriation or fiscal year limitation 

for the purpose of funding awards to 

whistleblowers (and to fund the Office 

of Inspector General’s Employee 

Suggestion Program).300

As of the end of Fiscal Year 2017, the 

balance of the IPF was approximately 

$322 million.301 Whenever the reserve 

in the IPF falls below $300 million, 

Section 21F(g)(3) requires the 

Commission to replenish the IPF.302 In 

May 2018, the balance of the IPF for the 

first time fell below the $300 million 

threshold that triggers the statutory 

replenishment mechanism; 303 this 

occurred when the Commission paid 

$83 million—its largest payout to date 

on an enforcement action—to three 

individuals. 

From August 2012 through April 

2018, the Commission’s whistleblower 

program issued 50 whistleblower 

awards to 55 individuals (including, as 

explained above, individuals who acted 

as joint whistleblowers).304 Table 1 of 

Section VII(A)(3) reports the frequency 

distribution of these awards by award 

size. Forty-two of these awards were 

less than $5 million, of which thirty-one 

awards were less than $2 million. Of the 

remaining eight awards, five were at 

least $5 million but less than $30 

million and three exceeded $30 

million.305 According to the Office of 

the Whistleblower, of the 55 individuals 

who have received awards, 

approximately 10 percent are highranking corporate executives at 

companies of varying sizes and a large 

majority of these executives received 

awards that were under $5 million. 

TABLE 1 OF SECTION VII(A)(3)—FREQUENCY DISTRIBUTION OF WHISTLEBLOWER AWARDS

[We use awards issued to whistleblowers by the SEC Whistleblower Program from August 2012 through April 2018. Number is the number of 

awards that fall within an award size category. Percent is the number of awards in an award size category as a fraction of the total number 

of awards.] 

Award size category Number Percent 

Less than $2 million ................................................................................................................................................. 31 62 

At least $2 million but less than $5 million .............................................................................................................. 11 22 


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306As noted, we aggregate related actions with 

their corresponding Commission actions for 

purposes of this analysis. 307Wage data used for calculating the annual 

wages per employee are derived from the quarterly 

tax reports submitted to state government workforce 

agencies by employers, subject to state 

unemployment insurance laws, and from Federal 

agencies subject to the Unemployment 

Compensation for Federal Employees program. 

Further information is available at https://

www.bls.gov/cew/cewbultn16.htm. 

308See ‘‘CEO and Executive Compensation 

Practices: 2017 Edition’’ (available at: https://

www.conference-board.org/publications/ 

publicationdetail.cfm?publicationid=7584). 309See ‘‘Equilar 200: Ranking the Largest CEO 

Pay Packages’’ (available at http://

www.equilar.com/reports/49-equilar-200-rankingthe-largest-ceo-pay-pakages-2017.html) for a 

summary of the study and its findings. See ‘‘Equilar 

200: The Largest CEO Pay Packages of 2016’’ 

(available at http://www.equilar.com/reports/49- 

table-equilar-200-ranking-largest-ceo-paypackages.html) for the ranking of CEOs by their pay 

packages. See ‘‘How the C.E.O. Rankings Were 

Done’’ (https://www.nytimes.com/2017/05/26/ 

business/how-the-ceo-rankings-were-done.html) for 

a discussion of the study’s methodology. 

310See ‘‘Financial Executive Compensation 

Report 2017’’ Grant Thornton, 2017 (available at: 

https://www.grantthornton.com/∼/media/contentpage-files/tax/pdfs/FEI-financial-exec-comp-survey2017/FEI-survey-results-2017.ashx). 

TABLE 1 OF SECTION VII(A)(3)—FREQUENCY DISTRIBUTION OF WHISTLEBLOWER AWARDS—Continued 

[We use awards issued to whistleblowers by the SEC Whistleblower Program from August 2012 through April 2018. Number is the number of 

awards that fall within an award size category. Percent is the number of awards in an award size category as a fraction of the total number 

of awards.] 

Award size category Number Percent 

At least $5 million but less than $10 million ............................................................................................................ 2 4 

At least $10 million but less than $15 million .......................................................................................................... 1 2 

At least $15 million but less than $20 million .......................................................................................................... 1 2 

At least $20 million but less than $30 million .......................................................................................................... 1 2 

At least $30 million .................................................................................................................................................. 3 6 

Total .................................................................................................................................................................. 50 100 

In addition to summarizing the 

distribution of awards to 

whistleblowers, we also summarize the 

distribution of awards by enforcement 

action. For each enforcement action, we 

identify all whistleblowers who receive 

an award for that enforcement action 

and sum up their awards to arrive at the 

aggregate award for that enforcement 

action. Table 2 of section VII(A)(3) 

indicates that between August 2012 and 

April 2018, there were 45 enforcement 

actions for which the Commission 

issued whistleblower awards.306 Thirtyseven enforcement actions had awards 

of less than $5 million, of which twentyeight awards were less than $2 million. 

Of the remaining eight actions, six had 

aggregate awards of at least $5 million 

but less than $30 million and only two 

had an aggregate award that exceeded 

$30 million. 

TABLE 2 OF SECTION VII(A)(3)—FREQUENCY DISTRIBUTION OF AWARDS BY ENFORCEMENT ACTION

[We use awards issued to whistleblowers by the SEC Whistleblower Program from August 2012 through April 2018. For each enforcement action, we identify all whistleblowers who receive an award for that enforcement action and sum up their awards to arrive at the aggregate 

award for that enforcement action. We then plot the distribution of aggregate awards by enforcement action. Number is the number of aggregate awards that fall within an award size category. Percent is the number of aggregate awards in an award size category as a fraction of 

the total number of awards.] 

Award size category Number Percent 

Less than $2 million ................................................................................................................................................. 28 62 

At least $2 million but less than $5 million .............................................................................................................. 9 20 

At least $5 million but less than $10 million ............................................................................................................ 3 7 

At least $10 million but less than $15 million .......................................................................................................... 2 4 

At least $15 million but less than $20 million .......................................................................................................... 0 0 

At least $20 million but less than $30 million .......................................................................................................... 1 2 

At least $30 million .................................................................................................................................................. 2 4 

Total .................................................................................................................................................................. 45 100 

4. Estimates of Current Annual Wages 

Prospective whistleblowers’ annual 

wages are potentially relevant to various 

aspects of the proposed rules. Table 3 of 

Section VII(A)(3) presents, by industry, 

the pre-tax annual wages per employee 

(‘‘average wages’’) estimated by the 

Bureau of Labor Statistics for 2016.307

Average wages vary from a low of 

$22,445 in the leisure and hospitality 

industry to a high of $98,458 in the 

information industry. 

These averages do not reflect the 

substantial degree of within-industry 

wage variation. For example, more 

senior employees involved in financial 

activities likely earn higher wages than 

their more junior counterparts, and staff 

that supply significant expertise may 

earn more than those that do not. A 

survey of 2,499 firms registered with the 

Commission and included in the Russell 

3000 Index as of May 2017 revealed 

median total CEO compensation at 

approximately $3.8 million.308 A study 

of the 200 largest pay packages awarded 

to CEOs at U.S. public companies in 

fiscal year 2016 revealed that the 

median pay for this group of CEOs was 

$16.9 million, while the average pay 

was $19.7 million.309 A 2017 report 

documenting survey responses from 377 

financial professionals included average 

base salaries for senior-level financial 

executives of between $133,859 and 

$342,154, depending on title and 

whether companies are public or 

private.310 Notwithstanding the 

foregoing, we think it is relevant to 

observe that although the compensation 

of CEOs and other senior ranking 

officials provides insights into the wage 

variation within a particular industry, in 

our experience a company’s workforce 

typically consists of far more lowerVerDate Sep<11>2014 18:30 Jul 19, 2018 Jkt 244001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 E:\FR\FM\20JYP2.SGM 20JYP2

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311 138 S. Ct. 767 (2018). 

paying positions, relatively speaking. 

For example, the average base salary for 

securities professionals working in New 

York City in 2015 (the last year for 

which such data is available) was 

$388,000 and the nominal value of the 

average annual bonus for that year was 

approximately $146,200. 

TABLE 3 OF SECTION VII(A)(3)—2016 ANNUAL WAGES PER EMPLOYEE BY INDUSTRY

[This table presents the pre-tax annual wages per employee at privately owned establishments aggregated by industry as reported by the Bureau 

of Labor Statistics] 

Industry 

Annual wages 

per employee 

($) 

Natural resources and mining ............................................................................................................................................................. $56,115 

Construction ......................................................................................................................................................................................... 58,647 

Manufacturing ...................................................................................................................................................................................... 64,870 

Trade, transportation, and utilities ....................................................................................................................................................... 44,764 

Information ........................................................................................................................................................................................... 98,458 

Financial activities ................................................................................................................................................................................ 88,841 

Professional and business services .................................................................................................................................................... 69,992 

Education and health services ............................................................................................................................................................ 48,058 

Leisure and hospitality ......................................................................................................................................................................... 22,445 

Other services ...................................................................................................................................................................................... 35,921 

Unclassified .......................................................................................................................................................................................... 51,837 

B. Analysis of Benefits, Costs, and 

Economic Effects of the Proposed Rules 

In this section, we discuss the 

potential benefits, costs, and economic 

effects of the proposed rules. For 

proposed Rule 21F–6(c), we also discuss 

alternatives to the approach 

contemplated in the proposed rule as 

well as reasons for rejecting those 

alternatives. 

1. Proposed Amendments to Rule 

21F–2 

Most of the proposed amendments to 

Rule 21F–2 are either in response to the 

Supreme Court’s decision in Digital 

Realty Trust, Inc. v. Somers 311 or do not 

differ substantively from current rules 

and practice. Two proposed 

amendments, however, do represent 

changes relative to the economic 

baseline, and their potential benefits, 

costs, and economic effects are 

discussed here. Proposed Rule 21F– 

2(a)(1) would extend employment 

retaliation protection only to an 

individual who provides the 

Commission with information ‘‘in 

writing.’’ Proposed Rule 21F–2(d)(1)(iii) 

would, among other things, limit 

employment retaliation protection to 

lawful acts that ‘‘relate to the subject 

matter’’ of the person’s submission to 

the Commission under proposed Rule 

21F–2(a). 

a. Proposed Rule 21F–2(a)(1) 

Proposed Rule 21F–2(a)(1) could 

potentially impose a burden on those 

individuals who want to report 

potential violations to the Commission 

and wish to qualify as a 

‘‘whistleblower’’ solely for employment 

retaliation protection. Such individuals 

might decide not to report to the 

Commission if the reporting burden is 

perceived to outweigh the benefits 

associated with retaliation protection. 

Our experience to date in the awards 

context suggests that requiring that 

information be provided in writing 

presents, at most, a minimal burden to 

individuals who want to report 

violations to the Commission. To the 

extent that this experience is 

informative about the reporting burden 

in the retaliation context, such a burden 

would also be, at most, minimal. 

Accordingly, the proposed rule would 

likely not have an adverse impact on the 

whistleblowing incentives of those 

individuals who wish to qualify as a 

‘‘whistleblower’’ solely for employment 

retaliation protection. 

We have considered several 

alternatives to the approach 

contemplated in proposed Rule 21F– 

2(a). The first alternative is to require 

information to be provided to the 

Commission through the online portal at 

http://www.sec.gov, or mailing or faxing 

a Form TCR to the Office of the 

Whistleblower. The second alternative 

is to permit additional manners of 

reporting for anti-retaliation purposes 

(such as placing a telephone call). 

We rejected the first alternative 

because it would, in our view, 

unnecessarily limit the means of 

reporting to the Commission by 

individuals who are merely seeking 

employment retaliation protection. 

Limiting whistleblower status to those 

individuals who follow the first 

alternative could result in the 

unnecessary exclusion of individuals 

from the benefits of Section 21F(h)(2)’s 

employment retaliation protections 

without providing any accompanying 

benefit to the Commission, 

whistleblowers, or the public generally. 

Further, requiring individuals to report 

‘‘in writing’’ could potentially impose 

lower costs (including time spent) on 

these individuals than the costs they 

would have borne under the first 

alternative. 

We rejected the second alternative 

because of potential costs that could 

arise if the Commission’s staff became 

ensnared by disputes in private antiretaliation lawsuits over what 

information was provided to whom on 

what dates. Requiring that any reporting 

be done in writing obviates these 

potential costs. 

b. Proposed Rule 21F–2(d)(1)(iii) 

Proposed Rule 21F–2(d)(1)(iii) helps 

avoid the result that an individual could 

qualify just once as a whistleblower and 

then receive lifetime protection for any 

non-Commission reports described in 

clause (iii) of Section 21F(h)(1)(A). For 

individuals who want to make nonCommission reports about potential 

violations to their employers and desire 

employment retaliation protection for 

such lawful acts, the proposed rule 

could increase the incentives of these 

individuals to instead report directly to 

the Commission. These individuals 

would only qualify for employment 

retaliation protection if they report to 

the Commission under the proposed 

rule. Reporting to the Commission ‘‘in 

writing’’ as contemplated under 

proposed Rule 21F–2(a) could 

potentially impose a burden on these 

individuals. In light of the analysis of 

proposed Rule 21F–2(a)(1) supra, we 

believe that such a reporting burden 

would, at most, be minimal and would 


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312See 17 CFR 240.21F–3(b)(3). 

313 17 CFR 240.21F–6(b). 

314 17 CFR 240.21F–16. 

likely not limit the reporting incentives 

afforded by proposed Rule 21F– 

2(d)(1)(iii). 

2. Proposed Rule 21F–3(b)(4) 

Proposed Rule 21F–3(b)(4) would 

provide that a law-enforcement action 

will not qualify as a related action if the 

Commission determines that there is a 

separate whistleblower award scheme 

that more appropriately applies to the 

enforcement action. Further, proposed 

Rule 21F–3(b)(4) would provide that the 

Commission will not make an award to 

the whistleblower for the related action 

if the whistleblower has already been 

granted an award by the authority 

responsible for administering the more 

applicable whistleblower award 

program. Further, under proposed Rule 

21F–3(b)(4), if the whistleblower was 

denied an award by the other award 

program, the whistleblower would not 

be permitted to readjudicate any issues 

before the Commission that the 

authority responsible for administering 

the other whistleblower award program 

resolved as part of the award denial. 

The proposed rule would prevent a 

whistleblower from adjudicating his or 

her contributions in separate forums 

and potentially obtaining two separate 

awards on the same enforcement action. 

While the existing rules preclude this 

result when an action is applicable to 

both the Commission’s whistleblower 

program and the CFTC’s whistleblower 

program,312 the existing rules do not 

expressly preclude this result when the 

non-SEC whistleblower program is 

administered by an authority other than 

the CFTC. Thus, the proposed rule 

would help the Commission avoid 

paying awards that are not reasonably 

necessary in light of the whistleblower 

program’s goals in cases where an action 

is applicable to the Commission’s 

whistleblower program and the 

whistleblower program of an authority 

other than the CFTC. 

The proposed rule would likely not 

have an adverse impact on the 

incentives of individuals who may 

report violations that result in 

enforcement actions potentially 

implicating both the Commission’s 

whistleblower program and the 

whistleblower program of another 

authority other than the CFTC. As 

discussed earlier in Section II(C), to 

date, the Commission has never paid an 

award on a matter where a second 

whistleblower program also potentially 

applied to the same matter, nor has the 

Commission ever indicated that it 

would do so. Given that the proposed 

rule codifies the Commission’s current 

practice, we believe that these potential 

whistleblowers would have already 

taken such current practice into account 

when deliberating on whether to report. 

3. Proposed Rule 21F–4(d)(3) 

Proposed Rule 21F–4(d)(3) would 

provide that, for purposes of making a 

whistleblower award, a non-prosecution 

agreement or deferred prosecution 

agreement entered into by the DOJ or a 

state attorney general in a criminal case, 

or a settlement agreement entered into 

by the Commission outside of the 

context of a judicial or administrative 

proceeding to address violations of the 

securities laws will be deemed to be an 

‘‘administrative action’’ and any money 

required to be paid thereunder will be 

deemed a ‘‘monetary sanction.’’ The 

proposed rule will result in more 

awards being paid from the IPF because 

awards would be paid for nonprosecution and deferred prosecution 

agreements entered into by the U.S. 

Department of Justice or a state attorney 

general as well as settlement agreements 

entered into by the Commission in 

addition to judicial or administrative 

proceedings covered by the existing 

rules. While potentially increasing 

payouts from the IPF, the proposed rule 

should enhance the incentives for 

whistleblowers to come forward in a 

timely manner to the extent that it 

signals to prospective whistleblowers 

that a wider array of enforcement 

resolutions may result in awards. 

4. Proposed Rule 21F–6(c) 

Proposed Rule 21F–6(c) would 

provide a mechanism for the 

Commission to adjust upwards any 

awards that would potentially be below 

$2 million to a single whistleblower. 

However, this new authority would 

come with important limitations. 

Specifically, the Commission will not 

adjust an award upward if any of the 

negative award factors that are 

identified in Exchange Act Rule 21F– 

6(b) 313 were found to be present with 

respect to the whistleblower’s award 

claim, or if the award claim triggers 

Exchange Act Rule 21F–16 (concerning 

awards to whistleblowers who engage in 

culpable conduct).314

The proposed rule could enhance the 

whistleblowing incentives of those 

individuals who anticipate receiving 

awards below $2 million and do not 

expect to be subject to any of the above 

conditions that would preclude an 

application of the award enhancement 

mechanism. The prospect of a larger 

award could encourage these 

individuals to report violations to the 

Commission. By withholding the 

upward adjustment if a whistleblower 

unreasonably delayed reporting to the 

Commission after learning the relevant 

facts, the proposed rule could increase 

whistleblowing incentives by 

encouraging individuals to report 

violations promptly and thereby 

facilitate the Commission’s ability to 

protect investors. 

The proposed rule could have a 

deterrent effect on potential violators 

because these individuals understand 

that they would lose the opportunity for 

an award enhancement if they engage in 

securities law violations and 

subsequently act as whistleblowers of 

those violations. Similarly, the proposed 

rule could have a deterrent effect on 

potential whistleblowers who 

contemplated interfering with an 

internal compliance and reporting 

system by denying award enhancements 

to such potential whistleblowers. 

From a cost perspective, the proposed 

rule could potentially result in larger 

awards being paid from the IPF because 

an award that would yield a potential 

payout to a single whistleblower below 

$2 million may be adjusted upward. As 

indicated in Table 1 of Section 

VII(A)(3), the Commission has granted 

31 whistleblower awards (i.e., 62% of 

awards) that were below $2 million. To 

the extent that the distribution of past 

awards provides a reasonable estimate 

of the distribution of likely future 

awards, smaller awards are likely in the 

future, some of which could be subject 

to the proposed rule. 

5. Proposed Rule 21F–6(d) 

a. Consideration of Proposed Rule 

Proposed Rule 21F–6(d) would 

provide a mechanism for the 

Commission to conduct an enhanced 

review of awards where the total 

monetary sanctions collected in the 

Commission or related actions would 

equal at least $100 million and where 

the potential payout to a single 

whistleblower in connection with those 

actions would exceed $30 million. 

Where these two conditions are met, the 

proposed rule would afford the 

Commission the discretion to determine 

if it is appropriate to adjust the award 

downward. The goal of any downward 

adjustment is to ensure that the likely 

total award payout to the whistleblower 

does not exceed an amount that the 

Commission determines is appropriate 

to achieve the program’s objectives of 

rewarding meritorious whistleblowers 

and sufficiently incentivizing future 

whistleblowers. However, consistent 

with the statutory mandate, in no event 


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315See Section VII(A)(3) for a discussion of the 

IPF and its replenishment mechanism. 

316One award that exceeded $30 million was 

issued in September 2014 in a Commission action 

and related actions. See Order Determining 

Whistleblower Award Claim, Exchange Act Release 

No. 34–73174 (Sept. 22, 2014), available at https:// 

www.sec.gov/rules/other/2014/34-73174.pdf. The 

second and third awards that exceeded $30 million 

were issued in March 2018 in a Commission action. 

See Order Determining Whistleblower Award Claim, 

Exchange Act Release No. 34–82897 (March 19, 

2018), available at https://www.sec.gov/rules/other/ 

2018/34-82897.pdf. 

317The proposed rule could affect a larger subset 

of potential whistleblowers if potential 

whistleblowers systematically overestimate the size 

of the recovery; conversely, the proposed rule could 

affect a smaller subset of potential whistleblowers 

if potential whistleblowers systematically 

underestimate the size of the recovery. 

318We acknowledge that there are other pending 

awards that could exceed the $30 million floor. We 

do not discuss those matters here because they have 

not been finalized, but we note that such awards 

would still constitute a relatively small proportion 

of the overall future potential awards that the 

Commission is likely to make. 

319See Anthony Heyes & Sandeep Kapur, An 

Economic Model of Whistleblower Policy, 25 J. L. 

Econ. & Org. 164–166 (2009) (providing a short 

review of academic literature on sociology and 

psychology and listing non-monetary motives for 

whistleblowing); see also Aaron S. Kesselheim et 

al., Whistle-Blower’s Experience in Fraud Litigation 

Against Pharmaceutical Companies, 362 New 

England J. Med. 1834, 1835 (2010) (listing selfpreservation, justice, integrity, altruism or public 

safety as primary motivations for qui tam lawsuits). 

See Securities Whistleblower Incentives and 

Protections, Exchange Act Release No. 64545, 76 FR 

at 34360, note 453 (June 13, 2011). 

320We note that the annual incomes presented 

below are pre-tax numbers, as are the wage and 

salary data presented in Section VII(A)(4). 

321See 17 CFR 240.21F–7(b)(1). 

would the total amount awarded to all 

whistleblowers in the aggregate be less 

than 10 percent of the monetary 

sanctions collected from the action. 

Further, an application of the proposed 

rule would not result in a reduction of 

an award below $30 million. We believe 

that the proposed rule could foster a 

more efficient use of the IPF by reducing 

the likelihood of awards that are 

excessive in light of the whistleblower 

program’s goals and the interests of 

investors and the broad public interest. 

As indicated in Table 1 of Section 

VII(A)(3), we have granted three 

whistleblower awards that exceeded $30 

million. These three awards alone 

reduced the balance of the IPF by 

approximately $112 million. To the 

extent that the distribution of past 

awards provides a reasonable estimate 

of the distribution of likely future 

awards, large awards are likely in the 

future, some of which could be subject 

to the proposed rule. Absent the 

proposed rule, the Commission may 

find itself faced with the possibility of 

paying out significantly large awards 

that are in excess of the amounts 

appropriate to advance the goals of the 

whistleblower program, the interests of 

investors and the broad public interest. 

These awards could also substantially 

diminish the IPF, requiring the 

Commission to direct more funds to 

replenish the IPF rather than directing 

those funds to the United States 

Treasury where they could be used for 

other important public purposes.315

As whistleblowers consider their 

reporting decisions, they weigh, among 

other things, the expected size of the 

award and the expected costs associated 

with their whistleblowing. We 

acknowledge that proposed paragraph 

6(d) could shift the upper end of the 

distribution of expected awards. 

However, we recognize that realized 

awards to date are typically 

substantially smaller in magnitude. In 

addition, according to the Office of the 

Whistleblower, of the 55 individuals 

who have received awards, 

approximately 10 percent are highranking corporate executives at 

companies of varying sizes and a large 

majority of these executives received 

awards that were under $5 million. This 

indicates to us that, as a practical 

matter, even those whistleblowers with 

the most to lose in terms of potential 

income have been willing to come 

forward for a recovery below the 

proposed $30 million floor. Thus, the 

data available does not indicate that 

proposed paragraph 6(d) would 

discourage whistleblowers from coming 

forward. 

Additional factors further support the 

view that potential whistleblowers will 

not be discouraged from coming forward 

as a result of proposed paragraph 6(d). 

As discussed earlier, $30 million would 

be a floor, not a ceiling on large awards. 

Rather, $30 million is the point above 

which we would begin to consider 

whether the likely award is consistent 

with the program’s objectives; we may 

choose not to reduce the award. 

Further, the operation of proposed 

paragraph 6(d) would likely affect only 

a small subset of potential 

whistleblowers. As discussed in Section 

VII(A)(3) above, to date we have issued 

50 whistleblower awards to 55 

individuals (including, as explained 

above, individuals who acted as joint 

whistleblowers) and only three awards 

(i.e., 6% of awards) have exceeded $30 

million.316 To the extent that the 

distribution of past awards provides a 

reasonable estimate of the distribution 

of likely future awards, and potential 

whistleblowers do not systematically 

over- or underestimate the size of 

recoveries,317 only a minority of 

potential whistleblowers would be 

potentially affected by the proposed 

rule.318

Additionally, our review of the 

academic literature relevant to 

whistleblower incentives indicates that 

whistleblowers are often willing to 

report notwithstanding the absence of 

financial incentives. Non-monetary 

incentives that can motivate individuals 

to report include: (i) A desire to see 

wrongdoers punished, (ii) an interest in 

‘‘doing the right thing’’ for the sake of 

investors or others who might be 

harmed by the wrongdoing, or (iii) a 

desire to protect one’s own selfinterests.319

Moreover, even at the $30 million 

floor that we are proposing, it appears 

to us that a $30 million award could 

yield a lump sum that, if invested in an 

annuity, could generate an annual 

return that is attractive in light of the 

wage and salary data presented in 

Section VII(A)(4).320 A number of nonmutually exclusive factors can 

contribute to making the lump sum 

smaller than the whistleblower award. 

First, to the extent that the 

whistleblower wishes to remain 

anonymous through the course of an 

investigation and resulting enforcement 

action, that whistleblower must have an 

attorney represent him or her in 

connection with a submission of 

information and claim for an award.321

The payment of attorney fees out of the 

whistleblower award would likely 

reduce the lump sum that could be 

invested in an annuity. Second, if the 

whistleblower award is awarded to two 

or more individuals who acted together 

as a joint whistleblower, then the award 

would likely be divided among the 

individual whistleblowers. Such a 

division of the award among the 

individual whistleblowers would 

reduce the lump sum that each 

individual could invest in an annuity. 

To illustrate the annual income that a 

whistleblower could potentially receive 

by investing the lump sum residual 

award that remains after accounting for 

the factors discussed above, we 

annuitize a range of possible lump sums 

to generate different streams of 

payments. Such payments could 

potentially replace the stream of wage 

payments that a whistleblower would 

lose by leaving his or her employer. 

Alternatively, if the whistleblower 

experiences no change in his or her 

employment situation, the payments 

could be interpreted as additional 

income. 

In Table 4 in Section VII(B)(5)(a), we 

report the annual income that could be 

generated over twenty years by 


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322The other assumptions used in the 

calculations are: A fixed income is paid at the end 

of every month; monthly compounding of interest; 

there is no residual income at the end of the 

annuity; the annuity has 12 × 20 = 240 monthly 

payments; income is pre-tax; annual income is 12 

multiplied by the monthly income generated by the 

annuity (e.g., for an upfront payment of $20 million 

and a 2% rate of return per annum, the annuity 

generates a monthly income of $101,176.67. 

Multiplying $101,176.67 by 12 yields the 

$1,214,120 figure reported in the table.) These 

assumptions notwithstanding, we note that only a 

portion of the fixed income generated by a 

purchased commercial annuity is taxable under IRS 

rules. See Internal Revenue Service Publication 939, 

General Rule for Pensions and Annuities available 

at https://www.irs.gov/pub/irs-pdf/p939.pdf. 

323 Id. 

324A perpetuity is a stream of fixed, periodic 

payments that go on indefinitely. 

325The other assumptions used in Table 6–8 are: 

A fixed income is paid at the end of every month; 

monthly compounding of interest; there is no 

residual income at the end of the annuity; the 

annuity has monthly payments; income is pre-tax; 

annual income is 12 multiplied by the monthly 

income generated by the annuity. These 

assumptions notwithstanding, we note that only a 

portion of the fixed income generated by a 

purchased commercial annuity is taxable under IRS 

rules. See Internal Revenue Service Publication 939, 

General Rule for Pensions and Annuities available 

at https://www.irs.gov/pub/irs-pdf/p939.pdf. 

investing a lump sum upfront payment 

in a twenty-year annuity.322 To capture 

the potential effects associated with 

taxes, attorneys’ fees, and award 

division among individuals acting as a 

joint whistleblower, we calculate 

different annual incomes by varying the 

upfront payment from $5 million to $50 

million in $5 million increments, and 

by varying the rate of return on the 

annuity from 2% per annum to 10% per 

annum in 2% increments. As an 

example, investing an upfront amount 

of $20 million in the annuity at 2% per 

annum generates an annual income of 

approximately $1.2 million.323 Table 4 

indicates that increasing the upfront 

payment while holding the rate of 

return constant increases the annual 

income; in addition, increasing the rate 

of return while holding the upfront 

payment constant also increases the 

annual income. To illustrate the effects 

of lengthening the duration of income 

generation, we repeat the calculations 

assuming a lump sum investment in a 

forty-year annuity (Table 5 in Section 

VII(B)(5)(a)), a sixty-year annuity (Table 

6 in Section VII(B)(5)(a)), and a 

perpetuity 324 (Table 7 in Section 

VII(B)(5)(a)). In Tables 5, 6, and 7, we 

continue to calculate different annual 

incomes by varying the upfront payment 

from $5 million to $50 million in $5 

million increments, and by varying the 

rate of return on the annuity from 2% 

per annum to 10% per annum in 2% 

increments.325

TABLE 4 IN SECTION VII(B)(5)(a)—ANNUAL INCOME GENERATED BY A TWENTY YEAR ANNUITY

[We assume that a lump sum upfront payment is invested in a twenty-year annuity to generate annual income over twenty years. We calculate 

different annual incomes by varying the upfront payment from $5 million to $50 million in $5 million increments, and by varying the rate of return on the annuity from 2% per annum to 10% per annum in 2% increments] 

Upfront payment 

Rate of return 

2% 4% 6% 8% 10% 

$5,000,000 ........................................................................... $303,530 $363,588 $429,859 $501,864 $579,013 

10,000,000 ........................................................................... 607,060 727,176 859,717 1,003,728 1,158,026 

15,000,000 ........................................................................... 910,590 1,090,765 1,289,576 1,505,592 1,737,039 

20,000,000 ........................................................................... 1,214,120 1,454,353 1,719,435 2,007,456 2,316,052 

25,000,000 ........................................................................... 1,517,650 1,817,941 2,149,293 2,509,320 2,895,065 

30,000,000 ........................................................................... 1,821,180 2,181,529 2,579,152 3,011,184 3,474,078 

35,000,000 ........................................................................... 2,124,710 2,545,117 3,009,010 3,513,048 4,053,091 

40,000,000 ........................................................................... 2,428,240 2,908,706 3,438,869 4,014,912 4,632,104 

45,000,000 ........................................................................... 2,731,770 3,272,294 3,868,728 4,516,776 5,211,117 

50,000,000 ........................................................................... 3,035,300 3,635,882 4,298,586 5,018,640 5,790,130 

TABLE 5 IN SECTION VII(B)(5)(a)—ANNUAL INCOME GENERATED BY A FORTY YEAR ANNUITY

[We assume that a lump sum upfront payment is invested in a forty-year annuity to generate annual income over forty years. We calculate different annual incomes by varying the upfront payment from $5 million to $50 million in $5 million increments, and by varying the rate of return on the annuity from 2% per annum to 10% per annum in 2% increments] 

Upfront payment 

Rate of return 

2% 4% 6% 8% 10% 

$5,000,000 ........................................................................... $181,695 $250,763 $330,128 $417,187 $509,488 

10,000,000 ........................................................................... 363,391 501,526 660,256 834,374 1,018,975 

15,000,000 ........................................................................... 545,086 752,289 990,385 1,251,561 1,528,463 

20,000,000 ........................................................................... 726,782 1,003,052 1,320,513 1,668,748 2,037,950 

25,000,000 ........................................................................... 908,477 1,253,815 1,650,641 2,085,935 2,547,438 

30,000,000 ........................................................................... 1,090,172 1,504,578 1,980,769 2,503,122 3,056,925 

35,000,000 ........................................................................... 1,271,868 1,755,342 2,310,897 2,920,309 3,566,413 

40,000,000 ........................................................................... 1,453,563 2,006,105 2,641,025 3,337,496 4,075,900 

45,000,000 ........................................................................... 1,635,258 2,256,868 2,971,154 3,754,683 4,585,388 

50,000,000 ........................................................................... 1,816,954 2,507,631 3,301,282 4,171,870 5,094,875 


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326 It is possible that the proposed rule could 

introduce uncertainty or ambiguity about the likely 

size of the whistleblower award, which may affect 

the incentives of individuals to report potential 

violations. See e.g., Itzhak Gilboa & David 

Schmeidler, Maxmin Expected Utility with NonUnique Prior, 18 J. Mathematical Econ. 141 (1989) 

(proposing an axiomatic foundation of a decision 

rule based on maximizing expected minimum 

payoff of a strategy). See also infra note 330. 

327See 15 U.S.C. 78u–6(d) and (h); 17 CFR 

240.21F–9(c). 

328See U.S. Securities and Exchange 

Commission, Office of the Inspector General, 

Assessment of the SEC’s Bounty Program, March 29, 

2010. 

TABLE 6 IN SECTION VII(B)(5)(a)—ANNUAL INCOME GENERATED BY A SIXTY YEAR ANNUITY

[We assume that a lump sum upfront payment is invested in a sixty-year annuity to generate annual income over sixty years. We calculate different annual incomes by varying the upfront payment from $5 million to $50 million in $5 million increments, and by varying the rate of return on the annuity from 2% per annum to 10% per annum in 2% increments] 

Upfront payment 

Rate of return 

2% 4% 6% 8% 10% 

5,000,000 ............................................................................. $143,163 $220,042 $308,505 $403,373 $501,274 

10,000,000 ........................................................................... 286,326 440,083 617,011 806,746 1,002,548 

15,000,000 ........................................................................... 429,489 660,125 925,516 1,210,119 1,503,821 

20,000,000 ........................................................................... 572,652 880,166 1,234,022 1,613,492 2,005,095 

25,000,000 ........................................................................... 715,815 1,100,208 1,542,527 2,016,865 2,506,369 

30,000,000 ........................................................................... 858,978 1,320,249 1,851,033 2,420,238 3,007,643 

35,000,000 ........................................................................... 1,002,141 1,540,291 2,159,538 2,823,611 3,508,917 

40,000,000 ........................................................................... 1,145,304 1,760,332 2,468,044 3,226,984 4,010,191 

45,000,000 ........................................................................... 1,288,466 1,980,374 2,776,549 3,630,357 4,511,464 

50,000,000 ........................................................................... 1,431,629 2,200,415 3,085,055 4,033,730 5,012,738 

TABLE 7 IN SECTION VII(B)(5)(a)—ANNUAL INCOME GENERATED FROM A PERPETUITY

[We assume that a lump sum upfront payment is invested in a perpetuity to generate annual income in perpetuity. We calculate different annual 

incomes by varying the upfront payment from $5 million to $50 million in $5 million increments, and by varying the rate of return on the annuity from 2% per annum to 10% per annum in 2% increments] 

Upfront payment 

Rate of return 

2% 4% 6% 8% 10% 

5,000,000 ............................................................................. $100,000 $200,000 $300,000 $400,000 $500,000 

10,000,000 ........................................................................... 200,000 400,000 600,000 800,000 1,000,000 

15,000,000 ........................................................................... 300,000 600,000 900,000 1,200,000 1,500,000 

20,000,000 ........................................................................... 400,000 800,000 1,200,000 1,600,000 2,000,000 

25,000,000 ........................................................................... 500,000 1,000,000 1,500,000 2,000,000 2,500,000 

30,000,000 ........................................................................... 600,000 1,200,000 1,800,000 2,400,000 3,000,000 

35,000,000 ........................................................................... 700,000 1,400,000 2,100,000 2,800,000 3,500,000 

40,000,000 ........................................................................... 800,000 1,600,000 2,400,000 3,200,000 4,000,000 

45,000,000 ........................................................................... 900,000 1,800,000 2,700,000 3,600,000 4,500,000 

50,000,000 ........................................................................... 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 

The annuity figures in Tables 4 

through 7 in Section VII(B)(5)(a) are 

consistent with our belief that the 

proposed $30 million floor should not 

negatively impact the overall pecuniary 

incentives faced by most potential 

whistleblowers considering whether to 

come forward to the Commission to 

report potential misconduct.326

In addition, to the extent that the 

costs associated with whistleblowing 

include social stigma and a possible job 

loss for the whistleblower, the 

employment anti-retaliation protections 

and confidentiality requirements 

(including, critically, the ability of 

whistleblowers to remain anonymous) 

can serve to reduce the costs associated 

with whistleblowing to some extent.327

Indeed, our experience to date has been 

that many company insiders have 

submitted their tips to the Commission 

anonymously. 

b. Estimating Incentives To Provide 

Information 

The Commission has sought to 

provide a quantitative estimate of the 

incentives to provide information via 

the whistleblower program. We 

acknowledge that a rigorous approach to 

analyzing the potential impact of the 

proposed changes on whistleblower 

incentives, would be to compare the 

number of whistleblower tips that 

resulted in successful enforcement 

actions before and after the 

establishment of the Commission’s 

whistleblower program. Such a 

comparison could elucidate changes in 

behavior due to the whistleblower 

program, including potentially those 

due to the provision of monetary 

awards. However, data on 

whistleblower tips that led to successful 

enforcement actions prior to the 

establishment of the Commission’s 

whistleblower program is not available, 

thus rendering such a comparison 

infeasible. Even absent such data, the 

Commission has engaged in a limited 

comparison of a pre-2011 awards 

program with the current whistleblower 

program. Section 21A(e) of the 

Exchange Act, added in 1988, 

authorized the Commission to award a 

bounty to a person who provides 

information leading to the recovery of a 

civil penalty from an insider trader, 

from a person who tipped information 

to an insider traders, or from a person 

who directly or indirectly controlled an 

insider trader. Section 21A(e) also 

established a limit on bounties of 10% 

of the amount recovered. 

A March 2010 report by the SEC’s 

Office of the Inspector General 

documented bounty applications and 

awards under the Commission’s bounty 

program since its inception in 1989.328

Between 1989 and 2010, the program 

had paid a total of $159,537 to five 

claimants in seven insider trading cases, 

at the statutory limit of 10% of 


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329 Id at 5. 

330See S. Rep. No. 111–176 at 110–12 (2010) at 

111 (noting the majority view that ‘‘the critical 

component of the Whistleblower Program is the 

minimum that any individual could look towards 

in determining whether to take the enormous risk 

of blowing the whistle in calling attention to 

fraud’’). 

331 17 CFR 240.21F–8(c)(7). 

332We acknowledge that this potential benefit 

rests, in part, on the premise that the applicants 

covered by the proposed rule would likely not 

change their behavior with respect to the overall 

award determination process. For example, an 

applicant that has been found to submit multiple 

frivolous award applications in the past would 

likely continue to do so in the future. 

recoveries.329 In contrast, since the 

inception of the whistleblower program 

in 2011 the Commission has ordered a 

single whistleblower payout related to 

an insider trading case, and that payout 

was less than $500,000. 

Any comparison of the bounty 

program and the whistleblower program 

is limited by substantial differences 

between the bounty program and the 

whistleblower program in scope and 

process. Although the number of 

payments in insider trading cases has 

declined under the current program, the 

larger scope and breadth of the 

whistleblower program has resulted in a 

substantial increase in the number and 

magnitude of payments overall. 

Differences in measures of 

whistleblower incentives before and 

after the establishment of the 

whistleblower program likely will 

reflect a combination of changes to 

Commission processes that occurred 

simultaneously or very close in time, 

limiting our ability to identify the 

impact of any single change on 

whistleblower incentives. For example, 

while the 2011 rules implemented an 

increase in the maximum award 

percentage to 30% from the previous 

10% maximum, they also established a 

10% minimum award percentage.330

Further, the 2011 rules also increased 

the scope of potential claims to include 

actions beyond insider trading and 

established an Office of the 

Whistleblower, actions that likely 

served to increase the prominence of the 

whistleblower program relative to the 

bounty program that preceded it. The 

implementing rules also set forth an 

updated process for the submission and 

evaluation of claims following 

criticisms that the bounty program was 

opaque and difficult for whistleblowers 

to navigate. Further, the statutory 

changes to the Exchange Act that 

established the whistleblower program 

also included explicit whistleblower 

protections. As we acknowledge that 

these factors limit the degree to which 

we can assess the potential impact on 

incentives of the proposed changes to 

the whistleblower program based on the 

transition from the bounty program to 

the whistleblower program, the 

Commission welcomes comment on 

changes to other whistleblower 

programs or alternative analytical 

methods that would permit more 

precise identification and quantification 

of the proposal’s potential impacts. 

c. Alternatives 

The Commission has considered 

several alternatives to proposed Rule 

21F–6(d). We discuss each of those 

alternatives below. 

The first alternative is to set the floor 

at $5 million, and the second alternative 

is to set the floor at $50 million. 

We believe that a $5 million floor 

could potentially apply to awards that 

are not the focus of the proposed 

amendment. As indicated in Table 1 of 

Section VII(A)(3), approximately 16% of 

past whistleblower awards are at least 

$5 million. To the extent that the 

distribution of past awards is a 

reasonable estimate of the distribution 

of likely future awards, this floor could 

result in the enhanced review of awards 

that are aligned with the program’s 

goals. Because the focus of the proposed 

rule is on large awards that are not 

reasonably necessary to achieve the 

program’s goals and that could 

disproportionately diminish the IPF, the 

$5 million floor is not preferable to the 

proposed approach. 

A $50 million floor is not preferable 

to the proposed approach. We have not 

granted awards that are at least $50 

million. Even if there were some cases 

where the proposed rule might be 

triggered, our discretion to make a 

meaningful and appropriate downward 

adjustment would be substantially 

reduced. Thus, the $50 million floor 

would likely not support the proposed 

rule’s goal of ensuring that the likely 

total award payout to the whistleblower 

does not exceed an amount that the 

Commission determines is appropriate 

to further the goals of the whistleblower 

program. Because of this concern, we 

believe that the $50 million floor is not 

preferable to the proposed approach. 

6. Proposed Rule 21F–8(e) 

Under proposed Rule 21F–8(e), if an 

applicant submits three or more award 

applications that the Commission finds 

to be frivolous or lacking a colorable 

connection between the tip and the 

Commission action, the Commission 

may permanently bar the applicant from 

submitting any additional award 

applications (either for Commission 

actions or related actions) and the 

Commission would not consider any 

other award applications that the 

claimant has submitted or may seek to 

submit in the future. 

The proposed rule would expressly 

provide, however, that the Office of the 

Whistleblower shall as a preliminary 

matter advise any claimant of the 

Office’s assessment that the claimant’s 

award application for a Commission 

action is frivolous or lacking a colorable 

connection between the tip and the 

action for which the applicant has 

sought an award. If the applicant 

withdraws the application at that time, 

it would not be considered by the 

Commission in determining whether to 

exercise its authority to impose a bar. 

In addition, the proposed rule would 

generally codify the Commission’s 

current practice with respect to 

applicants who violate Rule 21F– 

8(c)(7).331 That rule provides that an 

applicant shall be ineligible for an 

award if, in his or her whistleblower 

submission, his or her other dealings 

with the Commission, or his or her 

dealings with another authority in 

connection with a related action, the 

individual 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 with 

intent to mislead or otherwise hinder 

the Commission or another authority. 

The Commission has issued two final 

orders that have permanently barred the 

applicants from submitting any further 

whistleblower award applications based 

on violations of Rule 21F–8(c)(7). The 

proposed rule would clarify and codify 

the Commission’s authority to bar 

applicants by providing that if the 

Commission finds that a claimant has 

violated paragraph (c)(7) of Rule 21F–8, 

the Commission may permanently bar 

the applicant from making any future 

award applications, and shall decline to 

process any other award applications 

that the claimant has already submitted. 

The proposed rule could increase the 

speed and efficiency of the award 

determination process.332 By 

permanently barring applicants that 

make three or more frivolous award 

applications, as well as not processing 

any future applications from these 

barred applicants, the proposed rule 

could help free up staff resources that 

could then be devoted to processing 

potentially meritorious award 

applications. In the Commission’s 

experience to date, two individuals have 

submitted approximately 24% of all 

award applications in connection with 

Commission covered actions. All but 

one of the applications submitted by 


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333To help promote the SEC’s whistleblower 

program and establish a line of communication 

with the public, the Office of the Whistleblower 

operates a hotline where whistleblowers, their 

attorneys, or other members of the public with 

questions about the program may call to speak to 

the Office of the Whistleblower’s staff. During FY 

2017, the Office of the Whistleblower returned 

nearly 3,200 calls from members of the public, 

exceeding the number of calls returned the prior 

fiscal year. Since May 2011 when the hotline was 

established, the Office of the Whistleblower has 

returned over 18,600 calls from the public. See SEC 

Whistleblower Program 2017 Annual Report to 

Congress (Nov. 15, 2017), available at https://

www.sec.gov/files/sec-2017-annual-reportwhistleblower-program.pdf. 

334See supra text accompanying notes 184–189, 

331. 

335To date, four applicants submitted three or 

more applications that were determined to be 

potentially meritorious and not frivolous. 

336See Securities Whistleblower Incentives and 

Protections Adopting Release, 76 FR at 34355, note 

433. 

337 Id. An example of a non-pecuniary element is 

a sense of ‘‘doing the right thing.’’ 

338These individuals include those who are 

considering reporting a possible violation for the 

first time, those who have made one frivolous 

claim, and those who have made two frivolous 

claims. 

these two individuals have been found 

by the Office of the Whistleblower to be 

entirely frivolous. To the extent that the 

agency’s historical experience is 

informative about the likely behavior of 

applicants that submit multiple 

frivolous award applications in the 

future, the proposed rule would have a 

meaningful impact in terms of freeing 

up staff resources that could then be 

devoted to processing potentially 

meritorious award applications. This 

redeployment of staff resources in turn 

could expedite the processing of 

potentially meritorious award 

applications. More broadly, staff 

resources that are freed up as a result of 

the proposed rule could be devoted to 

other work related to the whistleblower 

program including, but not limited to, 

the posting of Notices of Covered 

Actions, determining potential payouts, 

and manning the whistleblower 

hotline.333 Further, as discussed in 

Section II(F), above, we have found that 

the repeat applicants that would be 

covered by proposed Rule 21F–8(e)(1) 

can significantly delay the processing of 

meritorious award applications and the 

eventual payment of awards by utilizing 

the procedural opportunities to object to 

an award. By barring such applicants, 

the proposed rule could reduce the 

delay in processing meritorious award 

applications and the eventual payment 

of awards. 

The abovementioned benefit would 

also potentially arise from the proposed 

rule’s deterrent effect to the extent that 

the proposed rule discourages 

individuals from submitting frivolous 

award applications because they 

recognize that the submission of 

frivolous award applications may 

ultimately permanently disqualify them 

from obtaining a whistleblower award. 

Overall, the proposed rule could 

increase the speed and efficiency of the 

award determination process by 

expediting the processing of potentially 

meritorious award applications, as well 

as the payment of awards. To the extent 

that faster award application processing 

and award payment motivate 

whistleblowing, individuals are more 

likely to come forward and report 

potential violations as a result of the 

proposed rule. 

The proposed rule could help protect 

investors and the public from potential 

harm (particularly where the 

misconduct concerns ongoing 

Commission actions) that may flow from 

the provision of false, fictitious, or 

fraudulent statement or representation, 

or false writing or document with intent 

of misleading or otherwise hindering 

the Commission or another authority. 

This benefit would potentially arise 

because the proposed rule would grant 

the Commission discretion to 

permanently bar applicants that violated 

Rule 21F–8(c)(7) from submitting any 

future award applications.334 This 

benefit would also potentially arise from 

the proposed rule’s deterrent effect to 

the extent that the proposed rule 

discourages individuals from engaging 

in the conduct prohibited by Rule 21F– 

8(c)(7), particularly when they are 

submitting their award applications, 

because they should recognize that it 

may not only lead to a denial of their 

current award claim but may also 

permanently disqualify them from 

obtaining a whistleblower award. 

Individuals who are permanently 

barred under the proposed rule might 

subsequently have information about 

possible securities law violations that 

could be provided to the Commission. 

To the extent that these barred 

individuals’ decision to report is based 

solely on the pecuniary motivation of 

obtaining a whistleblowing award, these 

individuals may decide not to report 

even if they have information about 

possible violations because they can no 

longer obtain a whistleblower award as 

a result of the proposed rule. We believe 

that this potential cost of the proposed 

rule could be mitigated by a number of 

factors. 

First, the number of individuals who 

may be permanently barred by the 

proposed rule for submitting three or 

more frivolous applications and who 

might subsequently have information 

about possible securities law violations 

that could be provided to the 

Commission is likely to be a small 

fraction of the population of award 

applicants. Based on our experience to 

date, we have found that individuals 

that submitted three or more award 

applications make up 6.6% of the 

population of covered action award 

applicants. This estimate constitutes an 

upper bound of the actual fraction of 

applicants that submitted three or more 

frivolous applications and subsequently 

had information about possible 

securities law violations that could be 

provided to the Commission.335 To the 

extent that our estimate is informative of 

the likely fraction of award applicants 

who may be permanently barred by the 

proposed rule, the potential cost 

associated with the proposed rule 

would be limited. 

Second, as discussed above, the 

Commission has issued two final orders 

that have permanently barred the 

applicants from submitting any further 

whistleblower award applications based 

on violations of Rule 21F–8(c)(7). The 

proposed rule would clarify and codify 

the Commission’s authority to bar 

applicants by providing that if the 

Commission finds that a claimant has 

violated paragraph (c)(7) of Rule 21F–8, 

the Commission may permanently bar 

the applicant from making any future 

award applications, and shall decline to 

process any other award applications 

that the claimant has already submitted. 

Given that the proposed rule codifies 

the Commission’s current practice, we 

believe that individuals who have been 

barred on the basis of Rule 21F–8(c)(7) 

would have already taken such current 

practice into account when deliberating 

on whether to report, even in the 

absence of the proposed rule. 

Finally, as discussed in the adopting 

release that accompanied the original 

whistleblower rules, whistleblowing is 

an individual decision that is generally 

guided by a complex mix of pecuniary 

elements and non-pecuniary 

elements.336 Individuals that are 

permanently barred from applying for 

whistleblower awards may still come 

forward and provide information about 

possible violations if they are 

sufficiently motivated by non-pecuniary 

elements.337

We also acknowledge the possibility 

that individuals who have made fewer 

than three frivolous award 

applications 338 might be discouraged 

from reporting possible securities law 

violations because their next award 

application could be determined to be 

frivolous, which would increase the 

likelihood of a permanent bar from 

making any future award applications. 


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339See Securities Whistleblower Incentives and 

Protections Adopting Release, 76 FR at 34355, note 

433. 

340 Id. An example of a non-pecuniary element is 

a sense of ‘‘doing the right thing.’’ 

341The time periods for submitting an award 

application are specified in Rule 21F–10(b) and 

Rule 21F–11(b). See 17 CFR 240.21F–10(b) & 11(b). 

342 17 CFR 240.21F–9. 

343 17 CFR 240.21F–8(b). 344The authority to require additional 

information of an applicant is delegated to the 

Office of the Whistleblower. See 17 CFR 240.21F– 

10(d). 

345 17 CFR 240.21F–9(a). 

346 17 CFR 240.21F–10(e)(2). 

347 17 CFR 240.21F–11(e)(2). 

We believe that this potential cost of the 

proposed rule could be mitigated by a 

number of factors. 

First, as discussed above, the 

proposed rule would expressly provide 

that the Office of the Whistleblower 

shall as a preliminary matter advise any 

claimant of the Office’s assessment that 

the claimant’s award application for a 

Commission action is frivolous or 

lacking a colorable connection between 

the tip and the action for which the 

applicant has sought an award. If the 

applicant withdraws the application at 

that time, it would not be considered by 

the Commission in determining whether 

to exercise its authority to impose a bar. 

We believe that this aspect of the 

proposed rule should alleviate the 

concerns among those individuals who 

have made fewer than three frivolous 

award applications that their next award 

application could be determined to be 

frivolous, which would increase the 

likelihood of a permanent bar from 

making any future award applications. 

Second, the claims adjudication 

processes that are specified in Rule 

21F–10 and Rule 21F–11 afford a 

whistleblower the opportunity to 

demonstrate the meritorious nature of 

her claim should her claim be 

preliminarily denied on the grounds of 

being frivolous. Thus, the claims 

adjudication processes should help 

ensure that potentially meritorious 

claims will be considered as such by the 

Commission. Third, as discussed above, 

whistleblowing is an individual 

decision that is generally guided by a 

complex mix of pecuniary elements and 

non-pecuniary elements.339 Individuals 

who are concerned about being 

permanently barred from applying for 

whistleblower awards may still come 

forward and provide information about 

possible violations if they are 

sufficiently motivated by non-pecuniary 

elements.340

7. Proposed Rule 21F–18 

Proposed Rule 21F–18(a) provides 

that the Office of the Whistleblower may 

use a summary disposition process to 

deny any award application that falls 

within any of the following categories: 

(1) Untimely award application; 341 (2) 

noncompliance with the requirements 

of Rule 21F–9,342 which concerns the 

manner for submitting a tip to qualify as 

a whistleblower and to be eligible for an 

award; (3) claimant’s information was 

never provided to or used by the staff 

handling the covered action or the 

underlying investigation (or 

examination), and those staff members 

otherwise had no contact with the 

claimant; (4) noncompliance with Rule 

21F–8(b),343 which requires an 

applicant to submit supplemental 

information that the Commission may 

require 344 and to enter into a 

confidentiality agreement; or (5) failure 

to specify in the award application the 

submission that the claimant made 

pursuant to Rule 21F–9(a) 345 upon 

which the claim to an award is based. 

In addition, the proposed rule would 

provide that other defective or nonmeritorious award applications could be 

subject to the summary disposition 

process under appropriate 

circumstances. Proposed Rule 21F–18(b) 

specifies the procedures that shall apply 

to any award application designated for 

summary disposition. 

The proposed rule could reduce the 

diversion of staff resources and time 

that it might otherwise take to process 

claims that may be rejected on 

straightforward grounds. An award 

application that is processed by the 

proposed summary disposition process 

would not require the Claims Review 

Staff to review the record, issue a 

Preliminary Determination, consider 

any written response filed by the 

claimant, or issue the Proposed Final 

Determination; these functions would 

be assumed by the Office of the 

Whistleblower. The summary 

disposition process incorporates two 

other modifications. First, the 30-day 

period for replying to a Preliminary 

Summary Disposition is shorter than the 

time period for replying to a Preliminary 

Determination provided for in Rules 

21F–10(e)(2) 346 and 21F–11(e)(2).347

This shorter period should be sufficient 

for a claimant to reply and that it is 

appropriate given that the matters 

subject to summary disposition should 

be relatively straightforward. Second, a 

claimant would not have the 

opportunity to receive the full 

administrative record upon which the 

Preliminary Denial was based. Instead, 

the Office of the Whistleblower would 

(to the extent appropriate given the 

nature of the denial) provide the 

claimant with a staff declaration that 

contains the pertinent facts upon which 

the Preliminary Summary Disposition is 

based. This modification from the 

record-review process specified in Rules 

21F–10 and 21F–11 should still afford 

any claimant a sufficient opportunity to 

provide a meaningful reply to a 

Preliminary Summary Disposition. This 

should eliminate the delay that can arise 

when a claimant does not expeditiously 

request the record (which in turn delays 

the start of the 60-day period for a 

claimant to submit a response to a 

preliminary determination); elimination 

of these delays should help further 

expedite the summary adjudication 

process that we are proposing. 

As with Proposed Rule 21F–8(e), staff 

resources that are freed up as a result of 

the proposed rule could be devoted to 

processing potentially meritorious 

award applications. This, in turn, could 

expedite the processing of potentially 

meritorious award applications. To the 

extent that faster processing of 

potentially meritorious award 

applications motivates whistleblowing, 

individuals may be more likely to come 

forward and report potential violations 

as a result of the proposed rule. Further, 

as noted in the discussion of proposed 

Rule 21F–8(e) above, staff resources that 

are freed up as a result of the proposed 

rule could be devoted to other work 

related to the whistleblower program. 

We acknowledge the potential that 

certain aspects of the proposed rule 

might make it more difficult for 

whistleblowers to respond to the denial 

of award applications. The proposed 

rule might reduce the whistleblowing 

incentives of those individuals who 

consider the ease of responding to 

award application denials when 

deciding whether to come forward and 

report potential violations. 

However, certain factors limit this 

potential for increased difficulties for 

whistleblowers. First, given that the 

matters subject to summary disposition 

should be relatively straightforward, we 

believe that the 30-day period for 

replying to a Preliminary Summary 

Disposition and the provision of a staff 

declaration (where applicable) should 

afford any claimant a sufficient 

opportunity to provide a meaningful 

reply to a Preliminary Summary 

Disposition. Second, as discussed 

above, the proposed rule may only be 

used to deny award applications that 

fall under certain restricted categories. 

Third, as discussed in the adopting 

release that accompanied the original 

whistleblower rules, whistleblowing is 

an individual decision that is generally 

guided by a complex mix of pecuniary 

elements and non-pecuniary 


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348See Securities Whistleblower Incentives and 

Protections Adopting Release, 76 FR at 34355, note 

433. 

349 17 CFR 240.21F–4(b)(3). 350See supra Sections VII(B)(6) and VII(B)(7). 

351See supra Section VII(B) for a discussion of 

how proposed Rules 21F–2(d)(1)(iii), 21F–4(d)(3), 

21F–6(c), 21F–8(e), 21F–18, and the interpretive 

guidance could increase whistleblowing incentives. 

352See Securities Whistleblower Incentives and 

Protections Adopting Release, 76 FR at 34362. 

353See id. note 466, which explains the link 

between investor trust in the fairness of the market 

and capital cost (‘‘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.’’). See also Ko, K. Jeremy, ‘‘Economics 

Note: Investor Confidence’’, October 2017, available 

at https://www.sec.gov/files/investor_confidence_

noteOct2017.pdf. 

354See supra SectionVII(B)(4). 

elements.348 Individuals who may be 

concerned with the ease of responding 

to award application denials may still 

come forward and provide information 

about possible violations if they are 

sufficiently motivated by non-pecuniary 

elements. 

8. Proposed Interpretive Guidance 

Regarding the Meaning and Application 

of ‘‘independent analysis’’ as Defined in 

Exchange Act Rule 21F–4(b)(3) 349

The proposed interpretive guidance 

helps to clarify the meaning of 

‘‘independent analysis’’ as that term is 

defined in Exchange Act Rule 21F–4 

and utilized in the definition of 

‘‘original information.’’ As discussed 

earlier, a whistleblower’s examination 

and evaluation of publicly available 

information does not constitute 

‘‘analysis’’ if the facts disclosed in the 

public materials on which the 

whistleblower relies and in other 

publicly available information are 

sufficient to raise an inference of the 

possible violations alleged in the 

whistleblower’s tip. In order for a 

whistleblower to be credited with 

‘‘analysis,’’ the whistleblower’s 

examination and evaluation should 

contribute ‘‘significant independent 

information’’ that ‘‘bridges the gap’’ 

between the publicly available 

information and the possible securities 

violations. Assuming that a 

whistleblower’s submission meets the 

threshold requirement that it constitutes 

‘‘independent analysis,’’ for the 

whistleblower to be eligible for an 

award the ‘‘information that . . . is 

derived from the . . . [whistleblower’s] 

analysis’’ must also be of such high 

quality that it leads to a successful 

enforcement action. 

The interpretive guidance could 

potentially reduce the whistleblowing 

incentives of those individuals who 

wish to satisfy the ‘‘independent 

analysis’’ prong of the ‘‘original 

information’’ requirement by examining 

publicly available information and 

providing observations that do not go 

beyond the information itself and 

reasonable inferences to be drawn 

therefrom. In light of the interpretive 

guidance, these individuals may decide 

not to provide such public information 

knowing that such information would 

not be credited as ‘‘independent 

analysis’’ and therefore not eligible for 

a whistleblower award. To the extent 

that the provision of public information 

improves Commission enforcement or 

otherwise provides a benefit, any 

potential reduction in such provision 

would be a cost associated with the 

interpretive guidance. Nevertheless, 

individuals who are aware that public 

information would not be credited with 

‘‘independent analysis’’ may still come 

forward and provide public information 

to the Commission if they are 

sufficiently motivated by non-pecuniary 

elements. 

The interpretive guidance could 

increase the whistleblowing incentives 

of those individuals who possess 

‘‘significant independent information’’ 

that ‘‘bridges the gap’’ between the 

publicly available information (and 

reasonable inferences therefrom) and 

the conclusion that possible securities 

violations are indicated, but may decide 

against reporting to the Commission 

because they do not fully understand 

the meaning of ‘‘independent analysis’’ 

in the absence of the interpretive 

guidance. To the extent that these 

individuals come forward and report 

such significant independent 

information to the Commission in light 

of the interpretive guidance, the 

quantity and quality of reported 

information might increase, which in 

turn might improve the Commission’s 

ability to enforce Federal securities 

laws, detect violations and deter 

potential future violations. Further, the 

clarification afforded by the interpretive 

guidance might also reduce the number 

of award applications that are made 

solely on the basis of the provision of 

public information and do not meet the 

‘‘independent analysis’’ threshold. To 

the extent that the number of such 

claims declines as a result of the 

interpretive guidance, staff resources 

could be freed up and devoted to 

processing potentially meritorious 

award applications and other work 

related to the whistleblower program as 

discussed earlier.350

C. Effects of the Proposed Rules on 

Efficiency, Competition, and Capital 

Formation 

As discussed earlier, the Commission 

is sensitive to the economic 

consequences of its rules, including the 

benefits, costs, and effects on efficiency, 

competition, and capital formation. The 

Commission believes that the proposed 

amendments will make incremental 

changes to its whistleblower program. 

Thus, the Commission does not 

anticipate the effects on efficiency, 

competition, and capital formation to be 

significant. 

The proposed rules could have a 

positive indirect impact on investment 

efficiency and capital formation by 

increasing the incentives of potential 

whistleblowers to provide information 

on possible violations.351 Providing 

such information could increase the 

effectiveness of the Commission’s 

enforcement activities More effective 

enforcement could lead to earlier 

detection of violations and increased 

deterrence of potential future violations, 

which should assist in a more efficient 

allocation of investment funds. Serious 

securities frauds, for example, can cause 

inefficiencies in the economy by 

diverting investment funds from more 

legitimate, productive uses.352

Additionally, to the extent that the 

proposed rules increase deterrence of 

potential future violations, investors’ 

trust in the securities markets would 

also increase. This increased investor 

trust will promote lower capital costs as 

more investment funds enter the market, 

and as investors generally demand a 

lower risk premium due to a reduced 

likelihood of securities fraud.353 This, 

too, should promote the efficient 

allocation of capital formation. 

At the same time, some proposed 

rules could reduce whistleblowing 

incentives in certain cases, although any 

such reduction in whistleblowing 

incentives—to the extent that it 

occurs—is justified in light of the 

positive indirect impact on investment 

efficiency and capital formation 

discussed earlier. Proposed Rule 21F– 

6(d) could reduce the whistleblowing 

incentives of those potential 

whistleblowers who anticipate receiving 

awards in excess of $30 million and 

make their reporting decision by trading 

off the expected size of the award 

against the expected costs associated 

with whistleblowing.354 Proposed Rule 

21F–8(e) might reduce the 

whistleblowing incentives of (i) those 

individuals who are permanently barred 

under the proposed rule from 

submitting award applications and (ii) 


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355See supra Sections VII(B)(4), VII(B)(6), 

VII(B)(7), and VII(B)(8). 

356See supra Section VII(B)(6). 

357See 76 FR at 34362. 

358Public Law 104–121, tit. II, 110 Stat 857 

(1996). 

359 5 U.S.C. 603(a). 

those individuals who have made fewer 

than three frivolous award applications. 

Proposed Rule 21F–18 might reduce the 

whistleblowing incentives of those 

individuals who consider the ease of 

responding to award application denials 

when deciding whether to come forward 

and report potential violations. The 

interpretive guidance might reduce the 

whistleblowing incentives of those 

individuals who wish to rely on the 

provision of solely public information to 

satisfy the ‘‘independent analysis’’ 

prong of the ‘‘original information’’ 

requirement for a whistleblower award. 

These potential reductions in 

whistleblowing incentives may be 

limited for reasons discussed earlier.355

Further, we reiterate our belief that any 

such reduction in whistleblowing 

incentives—to the extent that is 

occurs—is justified in light of the 

positive impact on investment 

efficiency and capital formation 

discussed earlier. 

The proposed rules that provide the 

Commission with additional 

considerations for awards may have 

opposite, albeit indirect, impacts on 

investment efficiency and capital 

formation by potentially altering the 

level of monetary incentives that 

whistleblower would expect at different 

recovery levels. On one hand, proposed 

Rule 21F–6(d) could reduce the 

whistleblowing incentives of those 

individuals who anticipate receiving 

awards in excess of $30 million by 

reducing their anticipated award to an 

amount of $30 million or greater; on the 

other hand proposed Rule 21F–6(c) 

could enhance the whistleblowing 

incentives of those individuals who 

anticipate receiving awards below $2 

million by increasing their anticipated 

award to an amount of up to $2 million. 

The proposed rules could also 

improve other forms of efficiency. 

Proposed Rule 21F–3(b)(4) and 

proposed Rule 21F–6(d) could foster a 

more efficient use of the IPF by avoiding 

awards that are not reasonably 

necessary in light of the whistleblower 

program’s goals and the interests of 

investors and the broad public interest. 

Further, certain proposed rules could 

promote efficiency in the processing of 

award applications. By permanently 

barring applicants that make frivolous 

or fraudulent award applications, 

proposed Rule 21F–8(e) could help free 

up staff resources that could be used to 

expedite the processing of potentially 

meritorious award applications as well 

as the payment of awards. Staff 

resources that are freed up as a result of 

proposed Rule 21F–18 could also 

expedite the processing of potentially 

meritorious award applications. As 

discussed in Sections VII(B)(6) and 

VII(B)(7) above, to the extent that faster 

award application processing and award 

payment motivate whistleblowing, 

individuals are more likely to come 

forward and report potential violations 

as a result of proposed Rule 21F–8(e) 

and proposed Rule 21F–18. To the 

extent that the proposed rules promote 

the timely reporting of possible 

violations by increasing whistleblowing 

incentives and prevent the provision of 

false, fictitious, or fraudulent statement 

or representation, or a false writing or 

document with intent of misleading or 

otherwise hindering the Commission or 

another authority,356 the efficiency in 

detecting violations would be enhanced 

in the sense that violations could be 

detected sooner, reducing losses 

associated with the misuse of resources. 

Greater efficiency in detecting violations 

could also speed up the public 

disclosure of such violations to 

securities markets. Price efficiency 

could be improved if earlier public 

disclosure of violations speeds up the 

incorporation of such news into security 

prices. 

Similar to the effects on capital 

formation, the effects of the proposed 

rules on competition would be indirect, 

and would flow from their effects on 

whistleblowing incentives. To the 

extent that the proposed rules increase 

the likelihood of detecting misconduct 

by increasing whistleblowing 

incentives, the proposed rules could 

reduce the unfair competitive 

advantages that some companies can 

achieve by engaging in undetected 

violations.357 Conversely, to the extent 

that the proposed rules decrease the 

likelihood of detecting misconduct by 

reducing whistleblowing incentives, the 

proposed rules could increase the unfair 

competitive advantages that some 

companies can achieve by engaging in 

undetected violations. 

Request for Comment 

The Commission seeks commenters’ 

views on all aspects of its economic 

analysis of the proposed amendments. 

In particular, the Commission asks 

commenters to consider the following 

questions: 

1. Are there costs and benefits 

associated with the proposed 

amendments that the Commission has 

not identified? If so, please identify 

them and if possible, offer ways of 

estimating these costs and benefits. 

2. Do, and if so at what point, awards 

become unreasonably large in light of 

the goals of the whistleblower program? 

Please explain and provide details. 

3. Are there effects on efficiency, 

competition, and capital formation 

stemming from the proposed 

amendments that the Commission has 

not identified? If so, please identify 

them and explain how the identified 

effects result from one or more 

amendments. 

4. How will lowering award amounts 

based on dollar figures impact the 

incentives of whistleblowers to provide 

the Commission with information on 

misconduct? Will potential 

whistleblowers view the $30 million 

floor as a cap? Why or why not? 

5. Are there data sources or data sets 

that can help the Commission refine its 

estimates of the lost wages earned by 

whistleblowers from their previous 

jobs? Besides lost wages, are there other 

ways to determine the effectiveness of 

whistleblower awards? 

6. Are there alternatives to the 

proposed rules that the Commission has 

not identified? If so, please identify and 

describe them. 

IX. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (‘‘SBREFA’’),358 the Commission 

solicits data to determine whether the 

proposed rule amendments constitute 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. 

Commenters 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. 

X. Regulatory Flexibility Act 

Certification 

Section 603(a) of the Regulatory 

Flexibility Act 359 requires the 

Commission to undertake an initial 

regulatory flexibility analysis of the 

proposed rules unless the Commission 

certifies that the proposed rules, if 


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360 5 U.S.C. 605(b). 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.360

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 whistleblower 

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) of the Regulatory 

Flexibility Act, that the proposed rules 

would not have a significant economic 

impact on a substantial number of small 

entities. 

Solicitation of Comments: We 

encourage the submission of comments 

with respect to any aspect of this 

Regulatory Flexibility Act Certification. 

To the extent that commenters believe 

that the proposed rules might have a 

covered impact, we ask they describe 

the nature of any impact and provide 

empirical data supporting the extent of 

the impact. We will place any such 

comments in the same public file as 

comments on the proposed amendments 

themselves. 

XI. Statutory Basis 

The Commission proposes the rule 

amendments, as well as the removal of 

references to various 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, Whistleblowing. 

Text of the Proposed Amendments 

For the reasons set out in the 

preamble, 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 

continues to read in part as follows: 

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

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

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 

78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 

78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 

80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 

4, 80b–11, 7201 et seq.; and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; and Pub. L. 111–203, 939A, 124 Stat. 

1887 (2010); and secs. 503 and 602, Pub. L. 

112–106, 126 Stat. 326 (2012), unless 

otherwise noted. 

* * * * * 

Section 240.21F is also issued under Pub. 

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

* * * * * 

■ 2. Section 240.21F–2 is revised to read 

as follows: 

§ 240.21F–2 Whistleblower status, award 

eligibility, and confidentiality and retaliation 

protections. 

(a) Whistleblower status. (1) You are a 

whistleblower for purposes of Section 

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

6) as of the time that, alone or jointly 

with others, you provide the 

Commission with information in writing 

that relates to a possible violation of the 

federal securities laws (including any 

law, rule, or regulation subject to the 

jurisdiction of the Commission) that has 

occurred, is ongoing, or is about to 

occur. 

(2) A whistleblower must be an 

individual. A company or other entity is 

not eligible to be a whistleblower. 

(b) Award eligibility. To be eligible for 

an award under Section 21F(b) of the 

Exchange Act (15 U.S.C. 78u–6(b)) 

based on any information you provide 

that relates to a possible violation of the 

federal securities laws, you must 

comply with the procedures and the 

conditions described in §§ 240.21F–4, 

240.21F–8, and 240.21F–9. You should 

carefully review those rules before you 

submit any information that you may 

later wish to rely upon to claim an 

award. 

(c) Confidentiality protections. To 

qualify for the confidentiality 

protections afforded by Section 

21F(h)(2) of the Exchange Act (15 U.S.C. 

78u–6(h)(2)) based on any information 

you provide that relates to a possible 

violation of the federal securities laws, 

you must comply with the procedures 

and the conditions described in 

§ 240.21F–9(a). 

(d) Retaliation protections. (1) To 

qualify for the retaliation protections 

afforded by Section 21F(h)(1) of the 

Exchange Act (15 U.S.C. 78u–6(h)(1)), 

you must satisfy all of the following 

criteria: 

(i) You must qualify as a 

whistleblower under paragraph (a) of 

this section before experiencing the 

retaliation for which you seek redress; 

(ii) You must reasonably believe that 

the information you provide to the 

Commission under paragraph (a) of this 

section relates to a possible violation of 

the federal securities laws; and 

(iii) You must perform a lawful act 

that meets the following two criteria: 

(A) First, the lawful act must be 

performed in connection with any of the 

activities described in Section 

21F(h)(1)(A)(i) through (iii) of the 

Exchange Act (15 U.S.C. 78u– 

6(h)(1)(A)(i) through (iii)); and 

(B) Second, the lawful act must relate 

to the subject matter of your submission 

to the Commission under paragraph (a) 

of this section. 

(2) To receive retaliation protection 

for a lawful act described in paragraph 

(d)(1)(iii) of this section, you do not 

need to qualify as a whistleblower 

under paragraph (a) of this section 

before performing the lawful act, but 

you must qualify as a whistleblower 

under paragraph (a) of this section 

before experiencing retaliation for the 

lawful act. 

(3) To qualify for retaliation 

protection, you do not need to satisfy 

the procedures and conditions for award 

eligibility in §§ 240.21F–4, 240.21F–8, 

and 240.21F–9. 

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

Act (15 U.S.C. 78u–6(h)(1)), including 

any rules promulgated thereunder, shall 

be enforceable in an action or 

proceeding brought by the Commission. 

■ 3. Section 240.21F–3 is amended by: 

■ a. Revising paragraph (b)(1); and 

■ b. Adding paragraph (b)(4). 

The revision and addition read as 

follows: 

§ 240.21F–3 Payment of awards. 

* * * * * 

(b) * * * 

(1)(i) A related action is a judicial or 

administrative action that is brought by 

one of the entities listed in paragraphs 

(b)(1)(i)(A) through (D) of this section, 

that is based upon information that 

either the whistleblower provided 

directly to the entity or the Commission 

itself passed along to the other entity 

pursuant to the Commission’s 

procedures for sharing information, and 

which is 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. 

(A) The Attorney General of the 

United States; 

(B) An appropriate regulatory 

authority; 

(C) A self-regulatory organization; or 

(D) A state attorney general in a 

criminal case. 


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(ii) The terms appropriate regulatory 

authority and self-regulatory 

organization are defined in § 240.21F–4. 

* * * * * 

(4)(i) Notwithstanding paragraph 

(b)(1) of this section, if a judicial or 

administrative action is subject to a 

separate monetary award program 

established by the Federal Government, 

a state government, or a self-regulatory 

organization, the Commission will deem 

the action a related action only if the 

Commission finds (based on the unique 

facts and circumstances of the action) 

that its whistleblower program has the 

more direct or relevant connection to 

the action. 

(ii) In determining whether a potential 

related action has a more direct or 

relevant connection to the 

Commission’s whistleblower program 

than another award program, the 

Commission will consider the nature, 

scope, and impact of the misconduct 

charged in the potential related action, 

and its relationship to the federal 

securities laws. This inquiry may 

include consideration of, among other 

things: 

(A) The relative extent to which the 

misconduct charged in the potential 

related action implicates the public 

policy interests underlying the federal 

securities laws (such as investor 

protection) versus other lawenforcement or regulatory interests 

(such as tax collection or fraud against 

the Federal Government); 

(B) The degree to which the monetary 

sanctions imposed in the potential 

related action are attributable to conduct 

that also underlies the federal securities 

law violations that were the subject of 

the Commission’s enforcement action; 

and 

(C) Whether the potential related 

action involves state-law claims and the 

extent to which the state may have a 

whistleblower award scheme that 

potentially applies to that type of lawenforcement action. 

(iii) If the Commission does determine 

to deem the action a related action, the 

Commission will not make an award to 

you for the related action if you have 

already been granted an award by the 

authority responsible for administering 

the other whistleblower award program. 

Further, if you were denied an award by 

the other award program, you will not 

be permitted to readjudicate any issues 

before the Commission that the 

authority responsible for administering 

the other whistleblower award program 

resolved against you as part of the 

award denial. Additionally, if the 

Commission makes an award before an 

award determination is finalized by the 

authority responsible for administering 

the other award scheme, the 

Commission shall condition its award 

on the meritorious whistleblower 

making a prompt, irrevocable waiver of 

any claim to an award from the other 

award scheme. 

■ 4. Section 240.21F–4 is amended by: 

■ a. Revising paragraph (c)(2); 

■ b. In paragraph (d)(2), removing the 

period from the end of the paragraph 

and adding in its place ‘‘; and’’; 

■ c. Adding paragraph (d)(3); and 

■ d. Revising paragraph (e). 

The revisions and addition read as 

follows: 

§ 240.21F–4 Other definitions. 

* * * * * 

(c) * * * 

(2) You gave the Commission original 

information about conduct that was 

already under examination or 

investigation by the Commission, the 

Congress, any other authority of the 

federal government, a state Attorney 

General or securities regulatory 

authority, any self-regulatory 

organization, or the PCAOB (except in 

cases where you were an original source 

of this information as defined in 

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

your submission significantly 

contributed to the success of the action. 

* * * * * 

(d) * * * 

(3) For purposes of making an award 

under §§ 240.21F–10 and 240.21F–11, 

the following will be deemed to be an 

administrative action and any money 

required to be paid thereunder will be 

deemed a monetary sanction under 

paragraph (e) of this section: 

(i) A non-prosecution agreement or 

deferred prosecution agreement entered 

into by the U.S. Department of Justice or 

a state attorney general in a criminal 

case; or 

(ii) A settlement agreement entered 

into by the Commission outside of the 

context of a judicial or administrative 

proceeding to address violations of the 

securities laws. 

(e) Monetary sanctions means: 

(1) A required payment that results 

from a Commission action or related 

action and which is either: 

(i) Expressly designated as 

disgorgement, a penalty, or interest 

thereon; or 

(ii) Otherwise required as relief for the 

violations that are the subject of the 

covered action or related action; or 

(2) 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 such action or 

any settlement of such action. 

■ 5. Section 240.21F–6 is amended by 

adding paragraphs (c), (d) and (e) to read 

as follows: 

§ 240.21F–6 Criteria for determining 

amount of award. 

* * * * * 

(c) Additional considerations in 

connection with certain smaller awards. 

When considering any meritorious 

whistleblower award application where 

the Commission—after applying the 

award factors specified in paragraphs (a) 

and (b) of this section—determines that 

the resulting payout to that 

whistleblower for the original 

information that he or she provided that 

led to one or more successful covered or 

related action(s), collectively, would be 

below $2 million (or any such greater 

amount that the Commission may 

periodically establish through 

publication of an order in the Federal 

Register), the Commission may adjust 

the award upward as provided for in 

this paragraph (c). 

(1) The Commission may make an 

upward adjustment that it determines is 

appropriate to ensure that the total 

payout to the whistleblower more 

appropriately achieves the program’s 

objectives of rewarding meritorious 

whistleblowers and sufficiently 

incentivizing future whistleblowers who 

might otherwise be concerned about the 

low dollar amount of a potential award; 

(2) The Commission shall not adjust 

an award upward under this paragraph 

(c) if any of the negative award factors 

specified in paragraph (b) of this section 

were found present with respect to the 

whistleblower’s award claim, or if the 

award claim triggers § 240.21F–16 

(concerning awards to whistleblowers 

who engage in culpable conduct); 

(3) In no event shall the Commission 

make an upward adjustment under this 

section to raise a potential payout (as 

assessed by the Commission at the time 

it makes the award determination) 

above $2 million (or by such other 

amount as the Commission may 

designate by order); and 

(4) The total amount awarded to all 

whistleblowers in the aggregate may not 

be greater than 30 percent of the total 

monetary sanctions collected, or likely 

to be collected, in any action (as 

assessed by the Commission at the time 

it makes the award determination). 

(d) Additional considerations in 

connection with certain large awards 

where the monetary sanctions collected 

would equal or exceed $100 million. 

When considering any meritorious 

whistleblower award application where 

the whistleblower’s original information 

led to one or more successful covered or 

related action(s), collectively, that 


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resulted in the collection of $100 

million or more in monetary sanctions 

or will likely result in such collections 

(as assessed by the Commission at the 

time it considers the award 

application(s)), the Commission shall 

determine the award amount as 

specified in paragraphs (d)(1) through 

(4) of this section. (For purposes of this 

rule, the Commission may adjust the 

$100 million threshold upward through 

publication of an order in the Federal 

Register.) 

(1) When applying the award factors 

in paragraphs (a) and (b) of this section, 

the Commission shall make any upward 

or downward adjustments by 

considering the impact of the 

adjustments on both the award 

percentage and the approximate 

corresponding dollar amount of the 

award. If the resulting payout would be 

below $30 million (or such greater 

alternative amount that the Commission 

may periodically establish through 

publication of an order in the Federal 

Register), then the downward 

adjustment provided for in paragraph 

(d)(2) of this section shall not be 

applicable. 

(2) After completing the award 

analysis required by paragraph (d)(1) of 

this section and determining the total 

dollar amount of the potential award for 

any action(s) based upon the 

whistleblower’s original information, 

the Commission shall consider whether 

that amount exceeds what is reasonably 

necessary to reward the whistleblower 

and to incentivize similarly situated 

whistleblowers. If the Commission finds 

that the total payout for any action(s) 

based upon the whistleblower’s original 

information would exceed an amount 

that is reasonably necessary, it may 

adjust the total payout for the action(s) 

downward to an amount that it finds is 

sufficient to achieve those goals. As is 

the case with every aspect of any award 

determination under this section, the 

Commission shall not consider the 

balance of the Investor Protection Fund 

(‘‘IPF’’) when determining whether to 

make an adjustment to an award under 

this paragraph (c). 

(3) Any downward adjustment to a 

whistleblower’s award for any actions 

based upon the whistleblower’s original 

information under paragraph (d)(2) of 

this section shall under no 

circumstances yield a potential total 

payout on all the actions, collectively, 

(as assessed by the Commission at the 

time that it makes the award 

determination) of less than either $30 

million or such greater alternative 

amount that the Commission may 

periodically establish through 

publication of an order in the Federal 

Register. 

(4) Further, any adjustments under 

paragraph (d)(2) of this section shall in 

no event result in the total amount 

awarded to all meritorious 

whistleblowers, collectively, for each 

covered or related action constituting 

less than 10 percent of the monetary 

sanctions collected in that action. 

(e) Future adjustments. Finally, in any 

order that adjusts any of the dollar 

amounts specified under paragraph (c) 

or (d) of this section, the Commission 

shall consider (among other factors that 

it deems relevant) whether the 

adjustment is necessary or appropriate 

to encourage whistleblowers to come 

forward and the potential impact any 

adjustment might have on the IPF. 

■ 6. Section 240.21F–7 is amended by 

revising the introductory text of 

paragraph (a) to read as follows: 

§ 240.21F–7 Confidentiality of 

submissions. 

(a) Pursuant to Section 21F(h)(2) of 

the Exchange Act (15 U.S.C. 78u– 

6(h)(2)) and § 240.21F–2(c), the 

Commission will not disclose 

information that could reasonably be 

expected to reveal the identity of a 

whistleblower provided that the 

whistleblower has submitted 

information utilizing the processes 

specified in § 240.21F–9(a), except that 

the Commission may disclose such 

information in the following 

circumstances: 

* * * * * 

■ 7. Section 240.21F–8 is amended by: 

■ a. Revising the section heading. 

■ b. Adding paragraphs (d) and (e). 

The revision and addition read as 

follows: 

§ 240.21F–8 Eligibility and forms. 

* * * * * 

(d)(1) The Commission will 

periodically designate on the 

Commission’s web page a Form TCR 

(Tip, Complaint, or Referral) that 

individuals seeking to be eligible for an 

award through the process identified in 

§ 240.21F–9(a)(2) shall use. 

(2) The Commission will also 

periodically designate on the 

Commission’s web page a Form WB– 

APP for use by individuals seeking to 

apply for an award in connection with 

a Commission-covered judicial or 

administrative action (15 U.S.C. 

21F(a)(1)), or a related action 

(§ 240.21F–3(b)(1)). 

(e) Submissions or applications that 

are frivolous or fraudulent, or that 

would otherwise hinder the effective 

and efficient operation of the 

Whistleblower Program may result in 

the Commission issuing a permanent 

bar as part of a final order in the course 

of considering a whistleblower award 

application from you. If such a bar is 

issued, the Office of the Whistleblower 

will not accept or act on any other 

applications from you, in the following 

circumstances: 

(1) If you make three or more award 

applications for Commission actions 

that the Commission finds to be 

frivolous or lacking a colorable 

connection between the tip (or tips) and 

the Commission actions for which you 

are seeking awards; or 

(2) If the Commission finds that you 

have violated paragraph (c)(7) of this 

section. Before any Preliminary 

Determination or Preliminary Summary 

Disposition is issued, the Office of the 

Whistleblower shall advise you of any 

assessment by that Office that your 

award application is frivolous or lacking 

a colorable connection between the tip 

and the action for which you have 

sought an award. If you withdrawal 

your application at that time, it will not 

be considered by the Commission in 

determining whether to exercise its 

authority under paragraph (e)(1) of this 

section. The Commission will consider 

whether to issue a permanent bar in 

connection with an award application 

that would trigger such a bar; the 

Preliminary Determination or 

Preliminary Disposition must state that 

a bar is being recommended and the 

applicant would thereafter have an 

opportunity to submit a response in 

accordance with the award processing 

procedures specified in §§ 240.21F– 

10(e)(2) and 240.21F–18(b)(3). 

■ 8. Section 240.21F–9 is amended by: 

■ a. Revising paragraphs (a) and (b); 

■ b. In paragraphs (c) and (d), removing 

the parenthetical phrase ‘‘(referenced in 

§ 249.1800 of this chapter)’’ wherever it 

appears; and 

■ c. Adding paragraph (e). 

The revisions and addition read as 

follows: 

§ 240.21F–9 Procedures for submitting 

original information. 

(a) To submit information in a manner 

that satisfies § 240.21F–2(b) and (c) you 

must submit your information to the 

Commission by any of these methods: 

(1) Online, through the Commission’s 

website located at www.sec.gov, using 

the Commission’s electronic TCR portal 

(Tip, Complaint or Referral); 

(2) Mailing or faxing a Form TCR to 

the SEC Office of the Whistleblower at 

the mailing address or fax number 

designated on the SEC’s web page for 

making such submissions; or 

(3) By any other such method that the 

Commission may expressly designate on 


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its website as a mechanism that satisfies 

§ 240.21F–2(b) and (c). 

(b) Further, to be eligible for an 

award, you must declare under penalty 

of perjury at the time you submit your 

information pursuant to paragraph 

(a)(1), (2), or (3) of this section that your 

information is true and correct to the 

best of your knowledge and belief. 

* * * * * 

(e) You must follow the procedures 

specified in paragraphs (a) and (b) of 

this section the first time you provide 

the Commission with information that 

you rely upon as a basis for claiming an 

award. If you fail to do so, then you will 

be deemed ineligible for an award in 

connection with that information (even 

if you later resubmit that information in 

accordance with paragraphs (a) and (b) 

of this section). Notwithstanding the 

foregoing, the Commission, in its sole 

discretion, may waive your 

noncompliance with paragraphs (a) and 

(b) of this section if the Commission 

determines that the administrative 

record clearly and convincingly 

demonstrates that you would otherwise 

qualify for an award and you 

demonstrate that you complied with the 

requirements of paragraphs (a) and (b) of 

this section within 30 days of the first 

communication with the staff about the 

information that you provided. 

■ 9. Section 240.21F–10 is amended by 

revising paragraphs (b), (c), and (d) to 

read as follows: 

§ 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. 

* * * * * 

(b) To file a claim for a whistleblower 

award, you must file Form WB–APP, 

Application for Award for Original 

Information Provided Pursuant to 

Section 21F of the Securities Exchange 

Act of 1934. You must sign this form as 

the claimant and submit it to the Office 

of the Whistleblower by mail or fax (or 

any other manner that the Office 

permits). All claim forms, including any 

attachments, must be received by the 

Office of the Whistleblower within 

ninety (90) 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, and your 

identity must be verified in a form and 

manner that is acceptable to the Office 

of the Whistleblower 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 staff designated by the 

Director of the Division of Enforcement 

(‘‘Claims Review Staff’’) will evaluate all 

timely whistleblower award claims 

submitted on Form WB–APP in 

accordance with the criteria set forth in 

these rules. In connection with this 

process, the Office of the Whistleblower 

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). Following that 

evaluation, the Office of the 

Whistleblower 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. 

* * * * * 

■ 10. Section 240.21F–11 is amended by 

revising paragraphs (b) and (d) to read 

as follows: 

§ 240.21F–11 Procedures for determining 

awards based upon a related action. 

* * * * * 

(b) You must also use Form WB–APP 

to submit a claim for an award in a 

potential related action. You must sign 

this form as the claimant and submit it 

to the Office of the Whistleblower by 

mail or fax (or any other manner that the 

Office permits) as follows: 

(1) If a final order imposing monetary 

sanctions has been entered in a 

potential 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 that you use for the 

Commission action. For purposes of this 

paragraph (b)(1) and paragraph (b)(2) of 

this section, a final order imposing 

monetary sanctions is entered on the 

date of a court or administrative order 

imposing the monetary sanctions; 

however, with respect to any agreement 

covered by § 240.21F–4(d) (such as a 

deferred prosecution agreement or a 

nonprosecution agreement entered by 

the Department of Justice), the 

Commission will deem the date of the 

entry of the final order to be the date of 

the earliest public availability of the 

instrument reflecting the arrangement if 

evidenced by a press release or similar 

dated publication notice; otherwise, the 

date of the last signature necessary for 

the agreement. 

(2) If a final order imposing monetary 

sanctions in a potential 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 within ninety (90) days of the 

issuance of a final order imposing 

sanctions in the potential related action. 

* * * * * 

(d) Once the time for filing any 

appeals of the final judgment or order in 

a potential 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 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 Office 

of the Whistleblower 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). Following this evaluation, the 

Office of the Whistleblower 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. 

* * * * * 

■ 11. Section 240.21F–12 is amended 

by: 

■ a. Revising the introductory text of 

paragraph (a); 

■ b. In paragraph (a)(2), removing the 

parenthetical phrase ‘‘(referenced in 

§ 249.1800 of this chapter)’’; and 

■ c. Revising paragraphs (a)(3) and (6). 

The revisions read as follows: 

§ 240.21F–12 Materials that may form the 

basis of an award determination and that 

may comprise the record on appeal. 

(a) The following items constitute the 

materials that the Commission, the 

Claims Review Staff, and the Office of 

the Whistleblower may rely upon to 

make an award determination pursuant 

to §§ 240.21F–21F–10, 240.21F–11, and 

240.21F–18: 

* * * * * 

(3) The whistleblower’s Form WB– 

APP, including attachments, any 

supplemental materials submitted by 

the whistleblower before the deadline to 

file a claim for a whistleblower award 

for the relevant Notice of Covered 

Action, and any other materials timely 

submitted by the whistleblower in 

response either: 

(i) To a request from the Office of the 

Whistleblower or the Commission; or 

(ii) To the Preliminary Determination 

or Preliminary Summary Disposition; 

* * * * * 

(6) Any other documents or materials 

from third parties (including sworn 

declarations) that are received or 


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obtained by the Office of the 

Whistleblower to resolve the claimant’s 

award application, including 

information related to the claimant’s 

eligibility. (Neither the Commission, the 

Claims Review Staff, nor the Office of 

the Whistleblower may rely upon 

information that the third party has not 

authorized the Commission to share 

with the claimant.) 

* * * * * 

■ 12. Section 240.21F–13 is amended by 

revising paragraph (b) to read as follows: 

§ 240.21F–13 Appeals. 

* * * * * 

(b) The record on appeal shall consist 

of the Final Order, any materials that 

were considered by the Commission in 

issuing the Final Order, and any 

materials that were part of the claims 

process leading from the Notice of 

Covered Action to the Final Order 

(including, but not limited to, the Notice 

of Covered Action, whistleblower award 

applications filed by the claimant, the 

Preliminary Determination or 

Preliminary Summary Disposition, 

materials that were considered by the 

Claims Review Staff in issuing the 

Preliminary Determination or that were 

provided to the claimant by the Office 

of the Whistleblower in connection with 

a Preliminary Summary Disposition, 

and materials that were timely 

submitted by the claimant in response 

to the Preliminary Determination or 

Preliminary Summary Disposition). The 

record on appeal shall not include any 

pre-decisional or internal deliberative 

process materials that are prepared 

exclusively to assist the Commission 

and the Claims Review Staff 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). When more 

than one claimant has sought an award 

based on a single Notice of Covered 

Action, the Commission may exclude 

from the record on appeal any materials 

that do not relate directly to the 

claimant who is seeking judicial review. 

■ 13. Add § 240.21F–18 to read as 

follows: 

§ 240.21F–18 Summary disposition. 

(a) Notwithstanding the procedures 

specified in §§ 240.21F–10(d) through 

(g) and in 240.21F–11(d) through (g), the 

Office of the Whistleblower may 

determine that an award application 

that meets any of the following 

conditions for denial shall be resolved 

through the summary disposition 

process described further in paragraph 

(b) of this section: 

(1) You submitted an untimely award 

application; 

(2) You did not comply with the 

requirements of § 240.21F–9 when 

submitting the tip upon which your 

award claim is based; 

(3) The information that you 

submitted was never provided to or 

used by the staff handling the covered 

action or the underlying investigation 

(or examination), and those staff 

members otherwise had no contact with 

you; 

(4) You did not comply with 

§ 240.21F–8(b); 

(5) You failed to specify in the award 

application the submission pursuant to 

§ 240.21F–9(a) upon which your claim 

to an award is based; and 

(6) Your application does not raise 

any novel or important legal or policy 

questions and the Office of the General 

Counsel concurs that the matter is 

appropriate for summary disposition. 

(b) The following procedures shall 

apply to any award application 

designated for summary disposition: 

(1) The Office of the Whistleblower 

shall issue a Preliminary Summary 

Disposition that notifies you that your 

award application has been designated 

for resolution through the summary 

disposition process. The Preliminary 

Summary Disposition shall also state 

that the Office has preliminarily 

determined to recommend that the 

Commission deny the award application 

and identify the basis for the denial. 

(2) Prior to issuing the Preliminary 

Summary Disposition, the Office of the 

Whistleblower shall prepare a staff 

declaration that sets forth any pertinent 

facts regarding the Office’s 

recommendation to deny your 

application. At the same time that it 

provides you with the Preliminary 

Summary Disposition, the Office of the 

Whistleblower shall, in its sole 

discretion, either: 

(i) Provide you with the staff 

declaration; or 

(ii) Notify you that a staff declaration 

has been prepared and advise you that 

you may obtain the declaration only if 

within fifteen (15) calendar days you 

sign and complete a confidentiality 

agreement in a form and manner 

acceptable to the Office of the 

Whistleblower pursuant to § 240.21F– 

8(b)(4). If you fail to return the signed 

confidentiality agreement within fifteen 

(15) calendar days, you will be deemed 

to have waived your ability to receive 

the staff declaration. 

(3)(i) You may reply to the 

Preliminary Summary Disposition by 

submitting a response to the Office of 

the Whistleblower within thirty (30) 

calendar days of the later of: 

(A) The date of the Preliminary 

Summary Disposition; or 

(B) The date that the Office of the 

Whistleblower sends the staff 

declaration to you following your timely 

return of a signed confidentiality 

agreement. 

(ii) The response should identify the 

grounds for your objection to the denial 

(or in the case of paragraph (a)(5) of this 

section, correct the defect). The 

response must be in the form and 

manner that the Office of the 

Whistleblower shall require. You may 

include documentation or other 

evidentiary support for the grounds 

advanced in your response. 

(4) If you fail to submit a timely 

response pursuant to paragraph (b)(3) of 

this section, the Preliminary Summary 

Disposition will become the Final Order 

of the Commission. Your failure to 

submit a timely written response will 

constitute a failure to exhaust 

administrative remedies. 

(5) If you submit a timely response 

pursuant to paragraph (b)(3) of this 

section, the Office of the Whistleblower 

will consider the issues and grounds 

advanced in your response, along with 

any supporting documentation that you 

provided, and will prepare a Proposed 

Final Summary Disposition. The Office 

of the Whistleblower may supplement 

the administrative record as 

appropriate. (This paragraph (b)(5) does 

not prevent the Office of the 

Whistleblower from determining that, 

based on your written response, the 

award claim is no longer appropriate for 

summary disposition and that it should 

be resolved through the claims 

adjudication procedures specified in 

either § 240.21F–10 or § 240.21F–11). 

(6) The Office of the Whistleblower 

will then notify the Commission of the 

Proposed Final Summary Disposition. 

Within thirty (30) calendar days 

thereafter, any Commissioner may 

request that the Proposed Final 

Summary Disposition be reviewed by 

the Commission. If no Commissioner 

requests such a review within the 30- 

day period, then the Proposed Final 

Summary Disposition will become the 

Final Order of the Commission. In the 

event a Commissioner requests a review, 

the Commission will consider the award 

application and issue a Final Order. 

(7) The Office of the Whistleblower 

will provide you with the Final Order 

of the Commission. 

(c) In considering an award 

determination pursuant to this rule, the 

Office of the Whistleblower and the 

Commission may rely upon the items 

specified in § 240.21F–12(a). Further, 

§ 240.21F–12(b) shall apply to summary 

dispositions. 


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PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 14. The general authority citation for 

part 249 continues to read as follows 

and sectional authorities for §§ 249.1800 

and 249.1801 are removed: 

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

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b), Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3), Pub. L. 112–106, 126 Stat. 309 

(2012); Sec. 107, Pub. L. 112–106, 126 Stat. 

313 (2012), and Sec. 72001, Pub. L. 114–94, 

129 Stat. 1312 (2015), unless otherwise 

noted. 

* * * * * 

Subpart S—[Removed and Reserved] 

■ 15. Remove and reserve subpart S. 

By the Commission. 

Dated: June 28, 2018. 

Brent Fields, 

Secretary. 

[FR Doc. 2018–14411 Filed 7–19–18; 8:45 am] 

BILLING CODE 8011–01–P 


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