On August 26, the U.S. Securities and Exchange Commission (SEC) adopted two amendments to the rules of its highly successful whistleblower program. The amendments, which were widely supported by whistleblower advocates, allow the agency to better award whistleblowers who voluntarily provide the agency with original information that leads to successful enforcement actions.

“The SEC hit a home run. The investors, the taxpayers, and the public are the biggest winners today,” said whistleblower lawyer Stephen M. Kohn, a partner in the firm of Kohn, Kohn and Colapinto.

The first amendment alters a 2020 rule change which added language stating that the SEC has the discretion to consider the dollar amount of an award making an award determination. The new amendment clarifies that the agency only has this authority in instances where it is increasing the amount of an award, not in instances where it is decreasing an award size.

“The Commission ensured that whistleblowers who turn in the biggest frauds will not be penalized by having their rewards reduced. As the Commission understood, paying large awards in the biggest fraud cases will have a deterrent effect on Wall Street,” Kohn said.

The second amendment concerns the agency’s payment of related action awards, awards issued by the SEC when a whistleblower’s information is used by another agency in a successful enforcement action. The rule change allows whistleblowers to qualify for related action awards even if the other agency has its own whistleblower award program. The SEC will be able to pay related action awards in these cases if the other program “is not is not comparable to the Commission’s program” or if the related action award would be for less than $5 million.

According to Kohn, who also serves as the Chairman of the Board of Directors of the National Whistleblower Center, “The related action requirements are among the most important features of the Dodd-Frank whistleblower law. These provisions ensure that whistleblowers will be rewarded not only for providing information to the SEC, but also if they cooperate with other law enforcement agencies that are investigating crimes based on the evidence they provide to the SEC. The related action provision ensures that the information provided to the Commission will be exploited to the maximum extent possible to hold accountable or put into jail all of the criminals who are ripping off investors, the taxpayers and the public.”

“I think that these rules will strengthen our whistleblower program,” said SEC Chair Gary Gensler. “That helps protect investors.” Since the SEC Whistleblower Program was established in 2010, it has allowed the agency to recover over $5 billion from fraudsters. Correspondingly, the agency has awarded over $1.3 billion in awards to over 280 whistleblowers.

The rule changes will become effective 30 days after publication in the Federal Register. These rules will apply to any whistleblower award application that is pending with the Commission as of that date, as well as to all future-filed award applications.