As we have discussed thoroughly here at Whistleblower Week Compliance Week, new whistleblower provisions were included in the Dodd-Frank Act that are expected to have major effects on both public companies and the SEC. Today, the Commission unanimously voted to propose a whistleblower program under Dodd-Frank that will to reward individuals who provide the agency with tips that lead to successful enforcement actions, and offered up an 181-page proposed rule for public comment. The SEC stated that the comment period will end of December 17, 2010.

The proposed rule and requests for comments are obviously quite lengthy and will require some time to digest, but here is a summary of some of the high-points of the proposal:

A whistleblower must provide the information voluntarily, i.e., before the government, an SRO, or the PCAOB asks for it.

The whistleblower must provide "original information" based upon the whistleblower's independent knowledge or analysis. The information must not already be known to the SEC and not derived exclusively from certain public sources.

Information will be deemed to have led to a successful enforcement action entitling the whistleblower to an award if (a) the information results in a new examination or investigation being opened and significantly contributes to the success of a resulting enforcement action, or (b) in rare instances, where the "information received from a whistleblower in relation to an ongoing investigation is so significant to the success of a Commission action that a whistleblower award should be considered."

In determining the amount of the award, one factor the SEC will consider is whether the whistleblower reported the potential violation through "effective internal whistleblower, legal or compliance procedures before reporting the violation to the Commission." The proposed rule explains that the SEC will consider higher percentage awards for whistleblowers who first report violations through their compliance programs because "corporate compliance programs play a role in preventing and detecting securities violations that could harm investors." The higher award is therefore intended to encourage whistleblowers to first report securities violations to their corporate compliance programs.

To further encourage employees to report internally first, the proposed rule would treat an employee as a whistleblower under Dodd-Frank as of the date that employee reports the information internally so long as the employee provides the same information to the SEC within 90 days.