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Dodd Frank – Procedural Aspects Of The Whistleblower Bounty (Part I)

May 31, 2013

The Final Rules make it significantly easier for individuals to submit information to the SEC concerning allegations of alleged violations of federal securities laws. A person who wishes to file a whistleblower complaint with the SEC, must submit a Form TCR (Tip, Complaint or Referral) (“TCR”) to the SEC on-line, or by fax or mail. The TCR elicits basic identifying information about the alleged whistleblower and his or her concerns, including information used to determine whether or not the alleged conduct suggests a violation of federal securities law. The TCR requires that the purported whistleblower answer certain threshold questions to determine eligibility to receive an award. The whistleblower (or counsel, in the case of an anonymous submission) must sign the TCR under penalty of perjury. Final Rules at 154. The TCR has been revised to allow for joint submissions by more than one alleged whistleblower.

In its commentary, the SEC contends that the TCR has been revised to encourage internal compliance and reporting. As discussed further below, however, nothing in the Final Rules, requires a whistleblower to use an employer’s internal compliance and reporting systems before filing a complaint with the SEC. Id. at 155. Nevertheless, the TCR now asks a purported whistleblower to provide details about any prior actions taken regarding the complaint, and requires the whistleblower to indicate whether he or she has reported the alleged violation to his or her supervisor, compliance office, whistleblower hotline, ombudsman, or any other available internal complaint mechanism. Id.

Hat tip: An outstanding article that covers the law and final regulations in comprehensive fashion is Dodd-Frank and the SEC Final Rule: From Protected Employee To Bounty Hunter, ST001 ALI-ABA 1487 (July 28-30, 2011), which was written by Littler Mendelson, P.C. lawyers John S. Adler, Edward T. Ellis, Barbara E. Hoey, Gregory C. Keating, Kevin M. Kraham, Amy E. Mendenhall, Kenneth R. O’Brian, and Carole F. Wilder. This post is partially derived from that article.

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