"Armed with trial lawyers and new large financial incentives to bypass these programs, whistle-blowers will go straight to the SEC with allegations of wrongdoing and keep companies in the dark," the U.S. Chamber of Commerce said in a statement after the vote. "This leaves expensive, robust compliance programs collecting dust."
In a step aimed at bolstering internal programs, the SEC measure includes a provision for saving a whistle-blower's place in line for 120 days if they chose to report to their company first. It will also consider participation in a company program in determining the percentage of sanctions awarded as a bounty.
The SEC proposal also aims to protect whistle-blowers against retaliation, which has been the focus of a lawsuit in U.S. District Court for the Southern District of New York. A May 4 opinion from Judge Leonard Sand held that Dodd-Frank says a person has to report wrongdoing to the SEC -- or be able to seek protection under other laws -- before receiving legal sanctuary.
The final rule won't provide protections to those who don't report to the SEC, reinforcing the court's interpretation.
Separately, commissioners voted 3-2 today to propose limits on the involvement of "bad actors" in Rule 506 securities sales and offerings. The measure, open for comment until July 14, would disqualify people barred from the securities business or convicted of a securities-related felony from exemptions that let issuers raise unlimited capital from accredited investors.