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Business Litigation Alert: "Can You Hear the Whistle Blowing?"

In a recent newsletter, I discussed the whistleblower provision of The Dodd-Frank Wall Street Reform and Consumer Protection Act, and the potential for increased policing by employees. The SEC recently released its final proposal on the rules governing this whistleblower provision that will take effect 60 days after they are published in the Federal Register.

This final proposal seems to be generally what was expected:

  • An eligible whistleblower must provide original information to the SEC on a voluntary basis, resulting in an enforcement action with penalties exceeding $1 million. This could net the employee from 10 to 30% of the total penalty.
  • The grace period for reporting internally is extended from 90 to 120 days, meaning that if an employee reports internally, they have a 120 day grace period to report to the SEC and will be credited as reporting on the date of the internal report.
  • The final rules do not mandate internal reporting, so companies are ultimately on their own to encourage their employees to utilize an internal process first, and to ensure they have an effective internal process in place for employee reporting.

While many companies continue to voice their concerns over the SEC’s final proposals, the SEC intends to finalize and implement the rules.

The bottom line is clear: companies should educate employees on the internal avenues available, encourage that employees report internally, and deal with legitimate reports before they hear the SEC whistle blow.


Jeff Elkin is a partner in the litigation section of Porter Hedges LLP.
He can be reached at 713.226.6617 or jelkin@porterhedges.com.

This information is made available for educational purposes only and does not offer specific legal advice or create an attorney-client relationship with the Firm. Do not use this information as a substitute for specific legal advice. Attorney advertising

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