15 USC 78u-6 - Securities whistleblower incentives and protection

U.S Code last checked for updates: Nov 22, 2024

§ 78u–6.

Securities whistleblower incentives and protection

(a)

Definitions

In this section the following definitions shall apply:

(1)

Covered judicial or administrative action

(2)

Fund

(3)

Original information

The term “original information” means information that—

(A)

is derived from the independent knowledge or analysis of a whistleblower;

(B)

is not known to the Commission from any other source, unless the whistleblower is the original source of the information; and

(C)

is not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a source of the information.

(4)

Monetary sanctions

The term “monetary sanctions”, when used with respect to any judicial or administrative action, means—

(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.

(5)

Related action

(6)

Whistleblower

(b)

Awards

(1)

In general

In any covered judicial or administrative action, or related action, the Commission, under regulations prescribed by the Commission and subject to subsection (c), shall pay an award or awards to 1 or more whistleblowers who voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action, in an aggregate amount equal to—

(A)

not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions; and

(B)

not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.

(2)

Payment of awards

(c)

Determination of amount of award; denial of award

(1)

Determination of amount of award

(A)

Discretion

(B)

Criteria

In determining the amount of an award made under subsection (b), the Commission—

(i)

shall take into consideration—

(I)

the significance of the information provided by the whistleblower to the success of the covered judicial or administrative action;

(II)

the degree of assistance provided by the whistleblower and any legal representative of the whistleblower in a covered judicial or administrative action;

(III)

the programmatic interest of the Commission in deterring violations of the securities laws by making awards to whistleblowers who provide information that lead to the successful enforcement of such laws; and

(IV)

such additional relevant factors as the Commission may establish by rule or regulation; and

(ii)

shall not take into consideration the balance of the Fund.

(2)

Denial of award

No award under subsection (b) shall be made—

(A)

to any whistleblower who is, or was at the time the whistleblower acquired the original information submitted to the Commission, a member, officer, or employee of—

(i)

an appropriate regulatory agency;

(ii)

the Department of Justice;

(iii)

a self-regulatory organization;

(iv)

the Public Company Accounting Oversight Board; or

(v)

a law enforcement organization;

(B)

to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award under this section;

(C)

to any whistleblower who gains the information through the performance of an audit of financial statements required under the securities laws and for whom such submission would be contrary to the requirements of section 78j–1 of this title; or

(D)

to any whistleblower who fails to submit information to the Commission in such form as the Commission may, by rule, require.

(d)

Representation

(1)

Permitted representation

(2)

Required representation

(A)

In general

(B)

Disclosure of identity

(e)

No contract necessary

(f)

Appeals

(g)

Investor Protection Fund

(1)

Fund established

(2)

Use of Fund

The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, for—

(A)

paying awards to whistleblowers as provided in subsection (b); and

funding the activities of the Inspector General of the Commission under section 78d(i) of this title.

(3)

Deposits and credits

(A)

In general

There shall be deposited into or credited to the Fund an amount equal to—

(i)

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, or the rules and regulations thereunder, underlying such action, unless the balance of the Fund at the time the monetary sanction is collected exceeds $300,000,000;

(ii)

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)

all income from investments made under paragraph (4).

(B)

Additional amounts

(4)

Investments

(A)

Amounts in Fund may be invested

(B)

Eligible investments

(C)

Interest and proceeds credited

(5)

Reports to Congress

Not later than October 30 of each fiscal year beginning after July 21, 2010, the Commission shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives a report on—

(A)

the whistleblower award program, established under this section, including—

(i)

a description of the number of awards granted; and

(ii)

the types of cases in which awards were granted during the preceding fiscal year;

(B)

the balance of the Fund at the beginning of the preceding fiscal year;

(C)

the amounts deposited into or credited to the Fund during the preceding fiscal year;

(D)

the amount of earnings on investments made under paragraph (4) during the preceding fiscal year;

(E)

the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection (b);

(F)

the balance of the Fund at the end of the preceding fiscal year; and

(G)

a complete set of audited financial statements, including—

(i)

a balance sheet;

(ii)

income statement; and

(iii)

cash flow analysis.

(h)

Protection of whistleblowers

(1)

Prohibition against retaliation

(A)

In general

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 because of any lawful act done by the whistleblower—

(i)

in providing information to the Commission in accordance with this section;

(ii)

in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or

(iii)

in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j–1(m) of this title, section 1513(e) of title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

(B)

Enforcement

(i)

Cause of action

(ii)

Subpoenas

(iii)

Statute of limitations

(I)

In general

An action under this subsection may not be brought—

(aa)

more than 6 years after the date on which the violation of subparagraph (A) occurred; or

(bb)

more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the employee alleging a violation of subparagraph (A).

(II)

Required action within 10 years

(C)

Relief

Relief for an individual prevailing in an action brought under subparagraph (B) shall include—

(i)

reinstatement with the same seniority status that the individual would have had, but for the discrimination;

(ii)

2 times the amount of back pay otherwise owed to the individual, with interest; and

(iii)

compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.

(2)

Confidentiality

(A)

In general

(B)

Exempted statute

(C)

Rule of construction

(D)

Availability to government agencies

(i)

In general

Without the loss of its status as confidential in the hands of the Commission, all information referred to in subparagraph (A) may, in the discretion of the Commission, when determined by the Commission to be necessary to accomplish the purposes of this chapter and to protect investors, be made available to—

(I)

the Attorney General of the United States;

(II)

an appropriate regulatory authority;

(III)

a self-regulatory organization;

(IV)

a State attorney general in connection with any criminal investigation;

(V)

any appropriate State regulatory authority;

(VI)

the Public Company Accounting Oversight Board;

(VII)

a foreign securities authority; and

(VIII)

a foreign law enforcement authority.

(ii)

Confidentiality

(I)

In general

(II)

Foreign authorities

(3)

Rights retained

(i)

Provision of false information

A whistleblower shall not be entitled to an award under this section if the whistleblower—

(1)

knowingly and willfully makes any false, fictitious, or fraudulent statement or representation; or

(2)

uses any false writing or document knowing the writing or document contains any false, fictitious, or fraudulent statement or entry.

(j)

Rulemaking authority

(June 6, 1934, ch. 404, title I, § 21F, as added Pub. L. 111–203, title IX, § 922(a), July 21, 2010, 124 Stat. 1841.)

cite as: 15 USC 78u-6