Whistleblower Program Rules, 54140-54152 [2022-18842]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 170 (Friday, September 2, 2022)]
[Rules and Regulations]
[Pages 54140-54152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18842]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-95620; File No. S7-07-22]
RIN 3235-AN03


Whistleblower Program Rules

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``SEC'' or 
``Commission'') is adopting amendments to the Commission's rules 
implementing its whistleblower program. Section 21F of the Securities 
Exchange Act of 1934 (``Exchange Act'') and the Commission's 
implementing rules provide that the Commission shall pay an award to 
eligible whistleblowers who voluntarily provide the Commission with 
original information about a violation of the federal securities laws 
that leads to the successful enforcement of a covered judicial or 
administrative action or a non-SEC related action. The amendments: 
expand the scope of related actions eligible for an award under the 
Commission's whistleblower program; clarify that the Commission may use 
its statutory authority under Section 21F to consider the dollar amount 
of a potential award to increase an award but provide that the 
Commission will not use any statutory authority it might have to 
decrease the amount of an award; and make several conforming changes 
and technical corrections.

DATES: The final rules are effective October 3, 2022. These amendments 
will apply to any whistleblower award application that is pending with 
the Commission as of that date, and to all future-filed award 
applications.

FOR FURTHER INFORMATION CONTACT: Emily Pasquinelli, Office of the 
Whistleblower, Division of Enforcement, at (202) 551-5973, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is amending the rules listed 
in the table below.

                               Amendments
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                                                           CFR citation
                  Commission reference                       (17 CFR)
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Rule 21F-3..............................................  Sec.   240.21F-
                                                                       3
Rule 21F-4..............................................  Sec.   240.21F-
                                                                       4
Rule 21F-6..............................................  Sec.   240.21F-
                                                                       6
Rule 21F-8..............................................  Sec.   240.21F-
                                                                       8
Rule 21F-10.............................................  Sec.   240.21F-
                                                                      10
Rule 21F-11.............................................  Sec.   240.21F-
                                                                      11
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I. Introduction

    The Commission's whistleblower rules, which are codified at 17 CFR 
240.21F-1 through 17 CFR 240.21F-18, provide the operative definitions, 
requirements, standards, and processes implementing the SEC's 
whistleblower program. The amendments being adopted make several 
changes to those rules.
    First, the Commission is amending 17 CFR 240.21F-3(b)(3) or Rule 
21F-3(b)(3) (hereinafter ``the Multiple-Recovery Rule'') to revise the 
definition of ``related action.'' A whistleblower may be eligible for 
an award from the SEC for certain non-SEC actions that meet the 
definition of a related action under our rules. The Multiple-Recovery 
Rule currently provides that when both the SEC's award program and 
another award program might apply to a non-SEC action, that action will 
be deemed a related action for purposes of an award from the Commission 
only if the SEC's whistleblower program has the ``more direct or 
relevant connection'' to the action. The amended Multiple-Recovery Rule 
provides additional circumstances in which a non-SEC action may qualify 
as a related action without regard to whether the Commission's program 
has the more direct or relevant connection to the action. Specifically, 
under the amended Multiple-Recovery Rule, a non-SEC action may qualify 
as a related action:
     When the non-SEC award program has an award range or 
fixed-dollar award cap that could yield an award that is meaningfully 
lower than what could be awarded under the Commission's whistleblower 
program;
     When the decision to grant an award under the non-SEC 
program is discretionary, even when any specified award criteria and 
eligibility requirements have been satisfied; and
     When the maximum award the Commission could potentially 
pay on the non-SEC action does not exceed $5 million (``$5-million 
provision'').
    Second, the Commission is amending Rule 21F-6, which concerns the 
Commission's discretion to apply award factors and set award amounts. A 
new paragraph 21F-6(d) provides that the Commission may exercise its 
authority to consider the dollar amount of a potential award when 
making an award determination only for the purpose of increasing, not 
decreasing, the award amount.
    The Commission is also adopting conforming amendments to Rules 21F-
10 and 21F-11, as well as technical revisions to Rules 21F-4(c) and 
21F-8 that correct errors in the rule text.

II. Description of Final Rule Amendments

A. Rule 21F-3(b)(3) Amendments Concerning Non-SEC Actions That Involve 
at Least One Other Award Program

    Under Exchange Act Section 21F, a whistleblower who obtains an 
award based on a Commission covered action also may be eligible for an 
award based on monetary sanctions that are collected in a related 
action. Exchange Act Section 21F(a)(5) and Exchange Act Rule 21F-
3(b)(1) provide that a non-SEC judicial or administrative action must 
meet certain conditions to potentially qualify as a related action. 
First, the action must be brought by the United States Department of 
Justice (``DOJ''), an appropriate regulatory authority (as defined in 
Exchange Act Rule 21F-4(g)), a self-regulatory organization (as defined 
in Exchange Act Rule 21F-4(h)), or a state attorney general in a 
criminal case. Second, the same original information that the 
whistleblower gave to the Commission must also have led to the 
successful enforcement of the non-SEC action.
    The Multiple-Recovery Rule imposes additional requirements for a 
non-SEC action to qualify as a related action where both the SEC's 
whistleblower program and at least one other, separate whistleblower 
program could potentially apply to the action. Rule 21F-3(b)(3) 
authorizes the Commission to pay an award on such an action only if the 
Commission determines that the SEC's whistleblower program has the more 
direct or relevant connection to the non-SEC action based on: (i) the 
relative extent to which the misconduct involved in the non-SEC action 
implicates the policy considerations underlying the Federal securities 
laws (such as investor protection) rather than other law-enforcement or 
regulatory interests; (ii) the degree to which the monetary sanctions 
imposed in the non-SEC action are attributable to conduct

[[Page 54141]]

that also underlies the Federal-securities-law violations that were the 
subject of the SEC's covered action; and (iii) whether the non-SEC 
action involves state-law claims, as well as the extent to which the 
state may have a whistleblower award program that applies to that type 
of law-enforcement action.\1\
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    \1\ Another provision of the Multiple-Recovery Rule directs that 
if a related-action claimant has already received an award from 
another program, that claimant may not receive an award or payment 
from the Commission. Relatedly, the Multiple-Recovery Rule provides 
that if a related-action claimant was denied an award from the other 
program, the claimant will not be able to re-adjudicate any fact 
decided against the claimant by the other program. And if the 
Commission decides that its whistleblower program has the more 
direct or relevant connection to the non-SEC action, the Multiple-
Recovery Rule provides that no payment will be made on the award 
unless the claimant promptly and irrevocably waives any claim to an 
award from the other program. The amendments will not impact these 
existing terms of the Multiple-Recovery Rule.
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1. Proposed Rule
    The Commission proposed to revise the Multiple-Recovery Rule to 
identify a limited number of additional circumstances under which a 
non-SEC action constitutes a related action for award purposes. The 
principal proposed revision was referred to as the ``Comparability 
Approach,'' and was intended to help ensure that the Multiple-Recovery 
Rule would not reduce whistleblowers' incentive to come forward, or 
place an undue burden on whistleblowers as a result of having come 
forward.\2\
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    \2\ The Multiple-Recovery Rule is designed to prevent the 
Commission's award program from displacing the important role that 
Congress intended for other whistleblower programs and to further 
the Commission's desire to continue to be a careful steward of the 
Investor Protection Fund (``IPF''), from which Commission awards are 
paid. The Comparability Approach is narrowly targeted to preserve 
the underlying goals of the Multiple-Recovery Rule.
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    The proposing release explained that the Comparability Approach 
would allow the Commission to treats a non-SEC action as a related 
action if the maximum potential monetary award from the alternative 
award program would be ``meaningfully lower'' than the maximum 
potential award from the Commission's program (i.e., 30 percent ``in 
total, of what has been collected of the monetary sanctions imposed''). 
The meaningfully lower standard could be triggered either because the 
other program involves a different award range or imposes a fixed-
dollar award cap. The proposed Comparability Approach would also 
authorize the Commission (without regard to which program has the more 
direct or relevant connection) to treat a non-SEC action as a related 
action if the decision whether to issue an award under the other 
program is entirely discretionary.
    To incorporate these aspects of the Comparability Approach into the 
Multiple-Recovery Rule, the Commission proposed to amend the opening 
sentence of Rule 21F-3(b)(3) to provide that the Multiple-Recovery Rule 
would not apply unless the other whistleblower program qualifies as a 
``comparable whistleblower program.'' A comparable whistleblower 
program would be defined, in turn, as an award program that: (i) does 
not have an award range or fixed-dollar award cap that would restrict 
the maximum potential award to an amount that is meaningfully lower 
than the maximum or minimum potential award to all eligible claimants 
(in dollar terms) that the Commission could make on the particular 
action; or (ii) does not afford the entity administering the other 
program with discretion to deny an award even if the established 
eligibility requirements and award criteria have been satisfied.
    The Commission further proposed that, under the Comparability 
Approach, the Multiple-Recovery Rule would be amended so that the 
Commission would deem a matter eligible for related-action status 
(without regard to which program has the more direct or relevant 
connection to the action) if the maximum award the Commission could 
under any circumstances be required to pay to all whistleblowers in 
connection with the non-SEC action would not exceed $5 million. As the 
Commission explained, this would occur when 30 percent of the monetary 
sanctions imposed in the non-SEC action would be a sum that is $5 
million or less.\3\
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    \3\ To ensure that a claimant would not receive multiple awards 
for the same non-SEC action, the proposed amendments would require 
that a claimant make an irrevocable waiver of any claim to an award 
from the other program within 60 calendar days of receiving notice 
of the Commission's award, and would also require the claimant to 
demonstrate compliance with the irrevocable-waiver requirement. The 
proposed amendments also provided that failure to comply with any of 
the terms or conditions of the amended rule could result in the 
claimant becoming ineligible for an award from the Commission on the 
non-SEC action (notwithstanding any prior award notice).
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    Although the Comparability Approach was the principal proposal 
offered for public comment, the Commission identified three other 
possible alternatives: the ``Whistleblower's Choice Option,'' the 
``Offset Approach,'' and the ``Topping-Off Approach.'' Under both the 
Whistleblower's Choice Option and the Offset Approach, current Rule 
21F-3(b)(3) would be repealed in its entirety. The Whistleblower's 
Choice Option would allow a whistleblower, after having received award 
determinations from the Commission and the entity administering the 
other program, to decide which award to accept (but the Commission 
would condition any payment from its program on the whistleblower first 
making an irrevocable waiver of any claim to an award from the other 
program). Under the Offset Approach, the Commission could make an award 
on a non-SEC action notwithstanding the potential that another program 
might make and pay an award on that same action, but the Commission 
would offset its payment by any amount another program pays on the same 
action. Under the Topping-Off Approach, the current framework of the 
Multiple-Recovery Rule would be retained but the Commission would have 
the discretion to increase the award amount on the Commission's own 
covered action (up to a total award of 30 percent of the monetary 
sanctions imposed) if the Commission concluded that the other program's 
award for the non-SEC action was inadequate.
2. Comments Received
    Virtually all of the commenters supported modifying the Multiple-
Recovery Rule to encompass additional circumstances in which non-SEC 
actions qualify as related actions, with some offering a view on which 
of the four proposed alternatives would be the best option.\4\
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    \4\ See, e.g., Anonymous (Apr. 12, 2022) (stating the ``four 
proposed approaches to address related action claims'' are a ``well 
thought-out and flexible strategy that seem designed to improve 
related action award determinations''); Eileen Morrell (Apr. 11, 
2022) (expressing general support for the proposed changes but not 
identifying a preference among the four Rule 21F-3(b)(3) 
alternatives that were offered for public comment).
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    The commenters generally favored either the Comparability Approach 
or the Whistleblower's Choice Option,\5\ though two commenters 
supported the Offset Approach, one commenter expressed a preference for 
the Topping-Off Approach, and several other commenters offered their 
own proposed approaches.\6\
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    \5\ One commenter made a general observation applicable to both 
the Comparability Approach and the Whistleblower's Choice Option 
that a claimant failing to comply with the irrevocable waiver or 
notice provisions of these proposed approaches ``should not be 
wholly disqualified from [a] reward unless egregious or malicious 
noncompliance is evidenced.'' Mark C. (Feb. 19, 2022). The proposed 
rule text for both options would permit the Commission in its 
discretion to factor these considerations into any determination 
relating to a claimant's non-compliance.
    \6\ See infra notes 27-34.

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[[Page 54142]]

    A number of commenters favored the Comparability Approach. One 
stated that this approach ``strikes the appropriate balance between 
ensuring that qualified whistleblowers are not subject to a diminished 
award due to a weaker alternative whistleblower program while also 
limiting the ability of whistleblowers to obtain a double recovery in a 
related action.'' \7\ Another commenter stated that the Comparability 
Approach would be ``extremely practical'' in situations where the award 
range is different, the other program has a fixed-dollar award cap, or 
the other program ``is discretionary[,] not mandatory[.]'' \8\ A third 
commenter expressed a preference for the Comparability Approach because 
it may impose less of an administrative burden on the staff and agency 
than the other proposals.\9\
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    \7\ NWC (Apr. 7, 2022) (``NWC supports the Comparability 
Approach proposed by the Commission.'').
    \8\ Anonymous-2 (Feb. 19, 2022).
    \9\ Mark C. (Feb. 19, 2022).
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    A few commenters raised concerns about the Comparability Approach. 
One stated that the Comparability Approach is ``confusing'' and ``would 
be difficult to administer.'' \10\ But a different commenter offered a 
contrary view, stating that ``[t]he Comparability Approach is laid out 
in a way that is easy to follow and understand how a whistleblower will 
be awarded by the SEC over another program.'' \11\ And another 
commenter stated that the Comparability Approach was suboptimal because 
it ``would result in . . . a penalty in situations in which the other 
whistleblower program was found to be `comparable' and has the `more 
direct or relevant connection' '' to the non-SEC action ``yet provides 
for a smaller award than the SEC would provide.'' \12\
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    \10\ Kohn, Kohn & Colapinto, LLP (Mar. 22, 2022) (``The better 
choice is [Whistleblower's Choice] which sets forth clear standards 
and procedures.'').
    \11\ Talia Finamore (Apr. 3, 2022).
    \12\ Cohen, Milstein, Sellers & Toll PLLC (Apr. 8, 2022). This 
commenter did state, however, that ``each of the proposed 
alternatives represents improvements over the [existing] Multiple-
Recovery Rule[.]''
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    Several commenters addressed specific elements of the Comparability 
Approach. For example, one commenter suggested that the $5-million 
provision of the Comparability Approach should be replaced with a 
provision authorizing the Commission to treat any non-SEC action that 
might implicate another award program as a potential related action for 
which the Commission would agree to pay an award equal to ``a minimum 
of 5% and maximum of 10% of the total amount of monetary sanctions 
recovered'' in that non-SEC action. The commenter stated that 
refashioning this aspect of the Comparability Approach would be 
``fair[er]'' for larger actions that would otherwise be excluded under 
the $5-million provision.\13\ Similarly, another commenter recommended 
that, instead of $5 million or some other fixed dollar amount, a 
percentage-based maximum might be better in case the whistleblower 
program rules are not regularly updated in the future.\14\ One 
commenter recommended that if the Comparability Approach is adopted, it 
should authorize an award whenever the total payout for the SEC's 
action and the non-SEC action would not collectively exceed $20 
million.\15\
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    \13\ Id.
    \14\ Mark C. (Feb. 19, 2022). Unlike the prior commenter, this 
commenter did not offer a suggestion of a particular percentage 
figure (or range).
    \15\ Kohn, Kohn, and Colapinto (Apr. 11, 2022).
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    Several commenters addressed the meaningfully lower standard for 
determining whether an alternative program is comparable.\16\ One such 
commenter explained that a benefit of the meaningfully lower standard 
is that it would allow the Commission to ``consider[ ] a 
whistleblower's financial circumstances when they volunteer information 
to the Commission.'' \17\ Another commenter recommended that the 
meaningfully lower standard must always be understood to encompass an 
award from another program that is ``less than 10%'' of the monetary 
sanctions collected in the non-SEC action.\18\
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    \16\ No commenter recommended replacing the meaningfully lower 
standard with a fixed number or percentage.
    \17\ Cornell Securities Law Clinic (Apr. 11, 2022). This 
commenter also opposed a fixed-dollar or percentage amount in lieu 
of the meaningfully lower standard ``because of the law of 
diminishing marginal returns.'' This commenter suggested that the 
meaningfully lower standard should focus on capturing award 
differences ``that are substantial enough to incentivize 
whistleblowers to volunteer pertinent information, often at the risk 
of their careers.''
    \18\ Kohn, Kohn & Colapinto, LLC (Apr. 11, 2022).
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    One commenter recommended that if another award program lacks the 
confidentiality protections that the SEC's program affords, then it 
should not be deemed comparable.\19\ As support, the commenter stated 
that ``Congress adopted very specific procedures that permit the SEC to 
forward information to alternative government programs that also 
protect the identity of the whistleblower and require these alternative 
government agencies to adhere to the [Section 21F(h)(2)] 
confidentiality rules.'' \20\
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    \19\ Kohn, Kohn & Colapinto, LLP (Apr. 11, 2022) (``The right to 
confidentiality must be part of any `comparable' related action.'' 
(emphasis in original)).
    \20\ Id.
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    Several commenters supported the Whistleblower's Choice Option. One 
stated that a benefit of that approach is that if ``either 
whistleblower rewards program is proposing to issue an award that the 
whistleblower feels is inadequate, then he/she has the choice of which 
program they want to [pay] the award based on their own 
determination.'' \21\ Similarly, another commenter stated that 
whistleblowers ``should get to decide which [award] they receive.'' 
\22\ And one commenter stated that the Whistleblower's Choice Option is 
preferable because it would: (1) have the Commission focus only on 
``the merits and eligibility of the whistleblower under the 
requirements of just the SEC program,'' because ``[w]hether or not 
another program applies should not impact the SEC's ultimate decision'' 
for an award determination; and (2) make ``the process more clear, 
straightforward, and understandable for the average claimant[]'' by 
removing ``a step from how the Commission currently processes 
claims[.]'' \23\ Finally, a commenter stated that under the 
Whistleblower's Choice Option ``whistleblowers will no longer 
intentionally withhold certain applications or information out of fear 
that the eventual awards will be severely limited by another program's 
restrictions because they will be allowed to choose the most favorable 
[award] option.'' \24\
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    \21\ Anonymous-2 (Feb. 19, 2022). See also Cohen, Milstein, 
Sellers & Toll PLLC (Apr. 8, 2022) (stating that the Whistleblower's 
Choice Option was the only option under which whistleblowers would 
under no circumstances be at risk of being ``penalized'' by being 
required to take an award from another agency ``when their 
information leads to a related action recovery that implicates both 
the SEC's and another agency's whistleblower program''); Laura 
Bonomini (Mar. 21, 2022) (stating that the Whistleblower's Choice 
Option would ``give[] the meritorious whistleblower agency over 
their own claim'').
    \22\ Talia Finamore (Apr. 3, 2022).
    \23\ Laura Bonomini (Mar. 21, 2022). See also Cornell Securities 
Law Clinic (Apr. 11, 2022) (stating that by eliminating the need to 
assess which program has a more ``direct or relevant'' connection to 
a case, or to assess the comparability of another program to the 
Commission's program in connection with a particular application, 
the Whistleblower's Choice Option would enhance ``administrative 
efficiency'' and ``reduc[e] administrative costs''); Kohn, Kohn & 
Colapinto, LLP (Mar. 22, 2022) (stating that the Whistleblower's 
Choice Option would be ``less confusing and simpler to implement'' 
than the other approaches proposed).
    \24\ Cornell Securities Law Clinic (Apr. 11, 2022) (explaining 
that in ``cases where the alternative programs provide significantly 
fewer financial incentives than the Commission's Program (i.e., 
absolute dollar ceilings for awards), it becomes very plausible that 
some potential-whistleblowers may make certain application decisions 
(i.e., withholding certain information) to avoid pitfalls that will 
severely limit their financial award later on'').

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[[Page 54143]]

    One commenter identified the risk that the Whistleblower's Choice 
Option could lead to award-processing delays because any payment of an 
award would depend on both the Commission's program and the alternative 
award program issuing their award determinations before a claimant 
could decide which of the awards to accept.\25\ Several other 
commenters identified potential modifications to the Whistleblower's 
Choice Option, including revising the Whistleblower's Choice Option so 
that a whistleblower could receive both a full award from the 
Commission and an award from the other agency that is 10 percent or 
less ``of the sanction'' collected in the non-SEC action. According to 
the commenter, this 10-percent exception from the general multiple-
recovery prohibition embodied in the Whistleblower's Choice Option is 
reasonable because it would permit only a relatively de minimis 
separate recovery, and it would be appropriate to permit a 
whistleblower to ``accept[ ] a small award'' payment from the other 
program without being subjected to mandatory disqualification under the 
SEC's program.\26\
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    \25\ Talia Finamore (Apr. 3, 2022).
    \26\ Kohn, Kohn & Colapinto, LLP (Mar. 22, 2022). See also Kohn, 
Kohn & Colapinto, LLP (Apr. 11, 2022) (stating that the Commission 
should not bar a whistleblower from receiving a related-action award 
if the whistleblower received a payment from another agency that is 
below the 10-percent minimum award authorized by Section 21F of the 
Exchange Act, unless the whistleblower knowingly and voluntarily 
waived a right to a Commission related-action award).
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    Two commenters supported the Offset Approach. One stated, without 
explanation, that the Offset Approach could produce more prompt awards 
and perhaps further incentivize whistleblowers to come forward.\27\ The 
other commenter stated that the Offset Approach is a ``good option as 
it allows the whistleblower to receive money from both programs but not 
actually double dip.'' \28\ But a commenter opposing the Offset 
Approach stated that it could violate the principle underlying proposed 
Rule 21F-6(d) that would prohibit the Commission from considering 
dollar amounts when adjusting award amounts downward.\29\
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    \27\ John Lao (Feb. 20, 2022).
    \28\ Talia Finamore (Apr. 3, 2022). This commenter acknowledged, 
however, that a potential difficulty with the Offset Approach is 
that it could take more processing time as it requires the other 
award program to make an award determination before the Commission 
could complete its award determination.
    \29\ Andres Rodriquez (Apr. 3, 2022).
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    One commenter supported the Topping-Off Approach, stating, without 
explanation, that it could produce prompt awards.\30\ Another commenter 
opposed the Topping-Off Approach, however, stating that ``[t]he 
topping-off approach feels confusing in how it would be 
implemented[.]'' \31\
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    \30\ John Lao (Feb. 20, 2022).
    \31\ Talia Finamore (Apr. 3, 2022).
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    Beyond the four approaches discussed above, several commenters 
included recommendations for other approaches. Two commenters stated 
that whistleblowers should be allowed to receive awards from all 
programs for which they qualify, even if this could result in the 
aggregate payout to whistleblowers for the non-SEC action exceeding 30 
percent of the sanctions collected in the action.\32\ According to one 
of these commenters, the Commission should effectuate this by ``simply 
rescinding the Multiple-Recovery Rule.'' \33\ Another commenter 
recommended that ``all whistleblower reports for publicly traded 
companies should be considered for SEC program awards'' irrespective of 
whether another program might have the more direct or relevant 
connection to the non-SEC action in question.\34\
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    \32\ Anonymous (Feb. 8, 2022); Better Markets (Apr. 11, 2022). 
See also Andres Rodriquez (Apr. 3, 2022) (suggesting an approach 
``whereby a whistleblower would receive the full amount of monetary 
awards by the [C]ommission in instances where whistleblowers also 
receive awards from other comparable programs'').
    \33\ This commenter asserted that the Commission may lack 
statutory authority ``to deny an award for a related action'' merely 
because another award program might also apply and might make an 
award too. Better Markets (Apr. 11, 2022) (stating that the ``plain 
language'' of Section 21F makes related-action award payments 
mandatory and that, while the statute ``establishe[s] the 
circumstances under which the SEC must deny an award,'' none of 
those involves the potential application of another award program). 
The commenter goes on to recommend that if the Commission declines 
to rescind the Multiple-Recovery Rule, the ``optimal'' alternative 
is the Whistleblower's Choice Option. The commenter states that 
``the other proposed approaches leave[] open the possibility that 
the SEC will not, itself, make an award to an otherwise eligible 
whistleblower for a related action,'' which (according to the 
commenter) ``conflicts with the letter and spirit of'' Section 21F.
    \34\ Joshua Moran (Apr. 12, 2022) (stating that it ``is unclear 
what other programs exist that would be more relevant'' where a 
publicly traded company is involved).
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3. Final Rule
    The Commission is adopting the Comparability Approach as proposed, 
because it is a practical, targeted modification of the Multiple-
Recovery Rule that will provide additional incentives to encourage 
individuals to report potential violations of the federal securities 
laws when another program has a statutory cap, significantly lower 
award range, or discretionary award structure.\35\ The Commission 
agrees with the statement that the Comparability Approach ``strikes the 
appropriate balance between ensuring that qualified whistleblowers are 
not subject to a diminished award due to a weaker alternative 
whistleblower program while also limiting the ability of whistleblowers 
to obtain a double recovery'' in a non-SEC action.\36\ The Commission 
also agrees that, as one commenter stated, ``[t]he Comparability 
Approach is laid out in a way that is easy to follow and understand'' 
for whistleblowers to assess when they might be awarded more for a non-
SEC action ``by the SEC's program instead of another award program, and 
vice versa.'' \37\
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    \35\ The Commission is not persuaded that the Comparability 
Approach ``would result in . . . a penalty in situations where'' the 
other program is comparable and a whistleblower is required to seek 
an award from that other program. Cohen, Milstein, Sellers & Toll 
PLLC (Apr. 8, 2022). The commenter states that a penalty would 
result because the other program ``provides for a smaller award than 
the SEC would provide.'' But to qualify as a comparable program the 
alternative program would have to have a structure that could result 
in awards comparable to those that could be made by the Commission, 
so any ``smaller award'' would not be a product of the other award 
program's award structure. Rather, any risk of a ``smaller award'' 
presumably would reflect the potential that the Commission and the 
other program might reach different conclusions about the 
appropriate award amount after an assessment of the facts and 
circumstances underlying a particular award application. And this 
resulting risk of a smaller award in any particular case is in any 
event counterbalanced by the potential that the other program might 
view the particular award application more favorably than the 
Commission might.
    \36\ NWC (Apr. 7, 2022).
    \37\ Talia Finamore (Apr. 3, 2022).
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    Although the comments made thoughtful arguments in support of the 
Whistleblower's Choice Option, the Offset Approach, and the Topping-Off 
Approach, the Commission on balance finds each of these alternatives 
less desirable given various competing considerations. As a threshold 
matter, these three alternatives could add significant delay to the 
processing of applications and/or payment of awards, because each could 
require the Commission to defer any award until the other program has 
made an award determination.\38\ Under the

[[Page 54144]]

whistleblower program that is administered by the Internal Revenue 
Service (``IRS''), for example, final decisions cannot ``be made until 
proceeds resulting from the action(s) have been collected'' and, even 
then, a final decision may be postponed until the multi-year 
``statutory period for [a taxpayer's] filing a claim for a refund has 
expired[.]'' \39\ Were the Commission to adopt the Whistleblower's 
Choice Option, the Commission's award process in such a case might be 
delayed (and thus no payment made) for a period of several additional 
years awaiting a final award determination from the IRS.\40\ And the 
same could be true with the Offset Approach, because the Commission 
would be required to withhold any payment to avoid the risk of 
overpaying for an amount that the IRS might ultimately pay. 
Importantly, any timing delays resulting from other award programs 
would potentially impact all award matters involving non-SEC actions 
that implicate a second award program; by contrast, under the Multiple-
Recovery Rule (as amended by the Comparability Approach) the Commission 
will experience no such delays on awards for non-SEC actions because 
the revised rule does not hinge on the award processes or 
determinations of the other program.\41\ The Topping-Off Approach would 
also pose a risk of delay because before determining whether and how 
much to ``top off'' a covered-action award the Commission would need to 
await a final determination from the other program on the non-SEC 
action.\42\
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    \38\ The proposing release briefly posited that the 
Whistleblower's Choice Option would not result in delay due to 
another award program's delays in making an award-determination. For 
the reasons explained above, however, the Commission agrees with a 
commenter's observation that Whistleblower's Choice would add delays 
to the processing time for awards. See Talia Finamore (Apr. 3, 
2022). The proposing release did observe, however, that the 
Whistleblower's Choice Option could cause delays because of the 
additional burden it might impose on limited staff resources. See 87 
FR 9280, 9287 (``[T]he Whistleblower's Choice Option could slow the 
overall processing of award claims given the limited staff resources 
and the likelihood that this approach would increase the staff's 
administrative workload.'').
    \39\ Internal Revenue Service, Special Topics Manual, 
25.2.2.6.1(1), available at https://www.irs.gov/irm/part25/irm_25-002-002.
    \40\ Internal Revenue Service, Chief Counsel Directives Manual 
for Litigation in District Court, Bankruptcy Court, Court of Federal 
Claims, and State Court, 34.5.2.4.2.1(1), available at https://www.irs.gov/irm/part34/irm_34-005-002#idm140486826695168 
(``Generally, the taxpayer must file a claim for refund within three 
years from the time he files his return or within two years from the 
time the tax was paid, whichever is later. If no tax return was 
filed, a claim must be filed within two years from the time the tax 
was paid.'' (internal citation omitted)).
    \41\ In the context of the Whistleblower's Choice Option, delays 
resulting from the other award program could cause meritorious 
whistleblowers to abandon (preemptively irrevocably waive) their 
claims before a final award determination is made by that other 
program so that they can proceed to accept the Commission's award 
offer. This would result in the IPF (from which SEC whistleblower 
awards are paid, see Exchange Act Section 21F(g)) absorbing costs 
resulting from delays and inefficiencies tied exclusively to another 
award program.
    \42\ Beyond the potential for processing and payment delays, the 
Commission also finds the Topping-Off Approach less desirable 
because, as explained in the proposing release, ``the Commission's 
ability to enhance or `top-off' a covered-action award to provide a 
whistleblower relief from a deficient award issued by another 
program for a non-SEC action would be limited in many instances.'' 
87 FR 9280, 9288. This would especially be so ``when the covered-
action award already (i.e., prior to any enhancement to account for 
a deficient award from the other program for the non-SEC action) is 
at or near the statutory maximum 30 percent award.'' Id. In such 
instances, ``the Commission would not have the ability to grant a 
significant percentage enhancement.'' Id.
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    An additional consideration that persuades the Commission that the 
Whistleblower's Choice Option, the Offset Approach, and the Topping-Off 
Approach are less desirable alternatives is the potential that these 
alternatives could create unintended friction between the Commission 
and our partner regulatory and law-enforcement agencies that oversee 
alternative award programs. Unlike under the Comparability Approach, 
there is a risk under each of the alternative approaches that the 
Commission and one of these other authorities would make ``conflicting 
factual determinations'' after reviewing the same non-SEC action.\43\ 
And under each of the alternatives there is the additional risk that a 
whistleblower could receive an award from the SEC's program for a non-
SEC action even though the whistleblower failed to satisfy a 
significant eligibility requirement or award criterion that may be 
based on important policy considerations and judgments by the other 
regulatory or law-enforcement authority.\44\ The Commission believes 
that minimizing the potential for situations in which the SEC could be 
perceived to second-guess or preempt the judgments of our partner 
regulatory and law-enforcement authorities favors the Comparability 
Approach over the other alternatives.\45\
---------------------------------------------------------------------------

    \43\ Id. at 9287.
    \44\ Id.
    \45\ Although two commenters recommended that the Commission 
allow multiple awards to a whistleblower for the same non-SEC action 
(even where the aggregate award on the action would exceed the 30-
percent maximum award that is the general award ceiling under 
federal whistleblower award programs), such an approach could be 
inconsistent with congressional intent. 87 FR 9283; 85 FR 70898, 
70908-09 & n.93.
---------------------------------------------------------------------------

    Several commenters recommended various modifications to the 
Comparability Approach, but the Commission is not persuaded that those 
revisions are warranted or appropriate. The suggestions generally 
concerned the meaningfully lower standard and the $5-million 
provision.\46\
---------------------------------------------------------------------------

    \46\ Although one commenter suggested that the scope of the 
definition of comparable whistleblower award program should be 
expanded to require that the other award program include heightened 
confidentiality measures comparable to those that Section 21F(h)(2) 
of the Exchange Act imposes on the Commission, the Commission is not 
persuaded that this is necessary. As the commenter itself explains, 
Section 21F(h)(2)'s heightened confidentiality requirements extend 
to other specified authorities and entities, which includes the 
authorities and entities that can bring actions that qualify as 
``related actions.'' Compare id. Section 21F(h)(2)(D) with id. 
Section 21F(a)(5). This appears to address to a substantial degree 
the underlying concern about confidentiality without modifying the 
Comparability Approach.
---------------------------------------------------------------------------

    Turning first to the meaningfully lower standard that is used to 
assess whether an alternative award program is a comparable program, 
the Commission is persuaded that this flexible standard is appropriate 
and that a fixed-dollar cap or percentage amount would not offer any 
programmatic advantages. For example, under this standard, a 
whistleblower might argue that the Commission should consider the 
particular whistleblower's own economic situation at the time that the 
individual reported the securities-law violation.\47\ The Commission 
does not agree that any time another program could yield an award that 
is below the Commission's 10-percent minimum award amount an award 
under the other program should automatically qualify as meaningfully 
lower.\48\ The commenter offered no persuasive justification for this 
position, and the Commission is unpersuaded to depart from the 
flexible, case-specific approach that the meaningfully lower standard 
affords.
---------------------------------------------------------------------------

    \47\ See supra note 17 and accompanying discussion.
    \48\ See supra note 8 and accompanying discussion.
---------------------------------------------------------------------------

    With respect to the $5-million provision of the Comparability 
Approach, the Commission has decided not to adopt the revisions 
suggested by commenters. In the Commission's view, it is appropriate to 
allow related-action awards (assuming the other relevant criteria are 
met) for a non-SEC action without regard to whether another award 
program has a more direct or relevant connection to the action when the 
maximum award the Commission could ever potentially be required to pay 
in the action would not exceed $5 million. As the proposing release 
explained, ``[w]hen the maximum award amount'' would not exceed $5 
million under any set of circumstances (i.e., if the entire amount of 
the monetary sanctions was in fact collected), it is reasonable to 
permit claimants the option of avoiding the expense and burden of 
applying to a second award

[[Page 54145]]

program and instead electing to pursue their related-action claims with 
the Commission.\49\ The Commission does not agree that, in lieu of the 
$5-million provision, the Commission should authorize payouts of ``a 
minimum of 5% and maximum of 10% of the total monetary sanctions 
received'' for all non-SEC actions where another award program applies 
(without regard to which program has the more direct or relevant 
connection).\50\ The Commission is concerned that this proposed 
modification could be contrary to Section 21F(b), which provides for a 
minimum award of ``not less than 10 percent'' of the collected monetary 
sanctions in an action. More fundamentally, this proposal (unlike the 
$5-million provision) fails to align closely with the Commission's core 
concern of lessening the expenses and other burdens on claimants in 
those instances where the non-SEC action would involve only a 
relatively small award amount.
---------------------------------------------------------------------------

    \49\ 87 FR 9280, 9285.
    \50\ See supra note 13 and accompanying discussion.
---------------------------------------------------------------------------

    Similarly, the Commission is unpersuaded that the $5-million 
provision should be replaced with a ``percentage-based figure'' 
(presumably a percentage at or above the statutory minimum 10-percent 
award).\51\ Even if only a minimum award amount of just 10 percent were 
adopted, this could still produce very large payouts in non-SEC actions 
that involve very large collected monetary sanctions.\52\ Given this 
potential, the Commission is persuaded that a percentage-based figure 
would not align as closely with the Commission's underlying policy 
concerns as the $5-million provision that is being adopted.
---------------------------------------------------------------------------

    \51\ See supra note 14 and accompanying discussion.
    \52\ As an example, were the Commission to provide that it will 
pay a 10-percent award on any non-SEC action even if another program 
might have a more direct or relevant connection to the action, then 
in a $100 million case the Commission would make a $10 million 
payout.
---------------------------------------------------------------------------

    Further, the Commission declines to modify the $5-million provision 
so that a non-SEC action could qualify as a related action 
(irrespective of which program has the more direct or relevant 
connection) if the total possible payout on that action and the 
Commission's covered action would be $20 million or less.\53\ As with 
the prior recommendation, the proposed revision would not align as well 
as the $5-million provision does with the overall objective of 
alleviating the risk that claimants might have to bear additional costs 
and burdens of dealing with another award program where the potential 
maximum payout on a non-SEC action is relatively small. The $5-million 
provision, by focusing on the potential payout of the related action 
alone, is better tailored to address the underlying policy concern.
---------------------------------------------------------------------------

    \53\ See supra note 15 and accompanying discussion.
---------------------------------------------------------------------------

    Finally, the following principles will apply where more than one 
individual provides information to the Commission that leads to the 
success of the action and the other award program is not comparable. 
Where two or more individuals are whistleblowers and they did not act 
jointly to contribute to the success of a related action (and the 
Commission determines that the other agency's award program was not 
comparable or that the maximum aggregate award payable would not exceed 
$5 million), each whistleblower will be able to determine separately 
whether to proceed under the Commission's program. Additionally, as is 
the case with all related-action claims involving multiple, independent 
whistleblowers, each claimant's application will be assessed separately 
to determine whether the applicant qualifies for an award. And in 
determining the appropriate award amount for any whistleblower who has 
elected to proceed under the SEC's program, the award guidelines and 
considerations specified in Exchange Act Rule 21F-5 \54\ and Rule 21F-6 
will be used in making the award assessment. Relatedly, when setting 
the award amount for any whistleblower who proceeds under the SEC's 
program, the Commission may consider the relative contributions of any 
whistleblower who opted to proceed under the alternative whistleblower 
program rather than the Commission's program. That said, in no event 
will the total award paid out on a related action to all the 
meritorious whistleblowers who proceed under the Commission's program 
be less than 10 percent or greater than 30 percent of the total 
monetary sanctions collected in the related action. But individuals who 
jointly provided the Commission with information will have to determine 
collectively to proceed under the Commission's program or the other 
program. This approach is consistent with the Commission's long-
standing practice of treating individuals who acted jointly as a single 
unit for assessing eligibility requirements, applying the award 
criteria, and determining a specific award amount. See generally 
Section 21F(a)(6) of the Exchange Act (referring to ``2 or more 
individuals acting jointly'' to provide information to the Commission).
---------------------------------------------------------------------------

    \54\ 17 CFR 240.21F-5.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission is adopting the 
Comparability Approach.
* * * * *
    Below is a decision tree that outlines how the amendments to Rule 
21F-3(b)(3) that effectuate the Comparability Approach will generally 
operate.
    Step 1. Is there another whistleblower program that might apply to 
a potential related (non-SEC) action for which a claimant is seeking an 
award?
     If yes, continue to step 2.
     If no, the matter would be treated as a potential related 
action and the Commission would process the claimant's award 
application against the general award criteria and eligibility 
requirements of the whistleblower rules.
    Step 2. If there is another program that applies to the potential 
related action, is it a ``comparable award program''?
     If the other award program is comparable, proceed to step 
3.
     If the other program is not comparable, the matter would 
be treated as a potential related action and the Commission would 
process the claimant's award application against the general award 
criteria and eligibility requirements of the whistleblower rules.
    Step 3. If the program is comparable, then determine whether 
either: (i) the absolute maximum payout the Commission could make on 
the potential related action is $5 million or less (i.e., 30 percent of 
the monetary sanctions ordered is $5 million or less); or (ii) the 
SEC's award program has the more direct or relevant connection to the 
action (relative to the other program) based on the facts and 
circumstances of the action.
     If the answer to both (i) and (ii) above is ``no,'' then 
the matter is not a related action.
     If the answer to (i) and/or (ii) in step 3 is ``yes,'' the 
matter would be treated as a potential related action and the 
Commission would process the claimant's award application against the 
general award criteria and eligibility requirements of the 
whistleblower rules.

B. Rule 21F-6(d) Amendment Regarding Consideration of the Potential 
Dollar Amount of an Award When Making an Award Determination

    Rule 21F-6 identifies the general criteria and standards that the 
Commission considers when determining the amount of an award. Rule 21F-
6(a) specifies that in deciding whether to increase an award the 
Commission will consider: (1) the significance of a whistleblower's

[[Page 54146]]

information to the action's success; (2) the degree of assistance 
provided by the whistleblower; (3) any Commission programmatic 
interests in deterring securities-law violations by making awards to 
whistleblowers; and (4) the whistleblower's participation in an 
internal compliance system. Rule 21F-6(b) provides that in determining 
whether to decrease the amount of an award the Commission will 
consider: (1) the whistleblower's culpability or involvement in matters 
associated with the Commission's action or related actions; (2) whether 
the whistleblower unreasonably delayed reporting the misconduct; and 
(3) whether the whistleblower undermined the integrity of an entity's 
internal compliance and reporting system. Finally, Rule 21F-6(c) 
establishes a presumption that (provided certain specified exclusions 
are not implicated) a whistleblower should receive the maximum 
statutorily permissible award amount if, based on the sums that have 
been collected or that are likely to be collected, the statutory 
maximum award in the aggregate for any covered and related actions will 
not exceed $5 million.
1. Proposed Rule
    The Commission proposed to add new paragraph (d) to Rule 21F-6 to 
cabin the Commission's use of its statutory authority to consider the 
dollar amount of an award when setting the award amount. Proposed 
paragraph (d) would restrict the Commission from considering the dollar 
amount of a potential award (when applying the award factors specified 
in Rule 21F-6, or in any other way) to decrease a potential award. But 
proposed paragraph (d) would reaffirm that the Commission may consider 
the dollar amount of a potential award for the limited purpose of 
increasing the award amount.
    Taken together, the provisions of proposed paragraph (d) would 
ensure that potentially large awards are not decreased because of their 
size, thus embodying a regulatory and programmatic determination by the 
Commission that ``large awards directly [advance] the purpose of the 
whistleblower program (and by extension the interests of the investing 
public) by incentivizing whistleblowers to report violations [of the 
securities laws] to the Commission.'' \55\ The Commission further 
reasoned that, because public information regarding how the Commission 
applies award factors is necessarily limited to avoid the release of 
information that could reveal a whistleblower's identity,\56\ 
uncertainty about the authority to lower potential awards based on 
their dollar amount risked creating the misimpression that the 
Commission is regularly exercising such authority. The proposing 
release expressed the concern that this could in turn deter individuals 
from reporting misconduct.
---------------------------------------------------------------------------

    \55\ Nothing about the proposed rule would disturb the 
Commission's long-standing practice in public whistleblower award 
orders of describing awards in appropriate dollar amounts, rather 
than percentages (which are generally redacted). Relatedly, 
paragraph (d) does ``not impact . . . the maximum-award presumption 
that Rule 21F-6(c) establishes.'' 87 FR 9280, 9291 n.65.
    \56\ See generally Exchange Act Section 21F(h)(2).
---------------------------------------------------------------------------

2. Comments Received
    The commenters that specifically addressed the proposed addition of 
paragraph (d) to Rule 21F-6 supported the proposal. Moreover, the 
reasons offered in support of the proposed amendment largely tracked 
the reasons the Commission advanced in the proposing release. For 
example, several of the commenters stated that the proposed amendment 
would address the concern that lowering an award based on the dollar 
size might discourage whistleblowers from coming forward.\57\ 
Relatedly, one commenter stated that the proposed change would reduce 
whistleblower uncertainty and increase whistleblower confidence in 
reporting violations.\58\
---------------------------------------------------------------------------

    \57\ See Cornell Securities Law Clinic (Apr. 11, 2022) 
(explaining that removing the authority to reduce awards based on 
dollar size is appropriate because the risk the Commission might 
reduce awards in this way ``would only instill more hesitation for 
people that are considering coming forward with pertinent 
information''); Better Markets (Apr. 11, 2022) (expressing support 
for limiting the authority of the Commission to lower dollar awards 
based on their dollar size for the reasons the Commission stated in 
the proposing release, including that ``high dollar awards serve the 
purpose of the whistleblower program by drawing public attention and 
thereby incentivizing whistleblowers to come forward''); Cohen, 
Milstein, Sellers & Toll PLLC (Apr. 8, 2022) (expressing support for 
the proposed change to Rule 21F-6 because ``discretionary authority 
to consider the dollar amount to reduce the size of awards adds 
uncertainty and decreases confidence in the award process,'' while 
``large awards increase the awareness of, and incentives to 
participate in, the SEC's whistleblower program''); Lee (Feb. 21, 
2022) (stating that the proposed amendment would be ``a crucial tool 
in the form of an incentive to motivate whistleblowers of the 
highest levels''); Benjamin Ng (Feb. 21, 2022) (``Clarifying that 
the Commission will never reduce award sums to whistleblowers is an 
important incentive for motivating whistleblowers of the highest 
levels.''). See also Kohn, Kohn & Colapinto, LLC (Apr. 11, 2022) 
(``strongly endors[ing] the proposed Rule 21F-6(d) as written'' and 
explaining that ``[b]y paying larger rewards, the Commission will 
incentivize high quality reporting from well-placed insiders, and 
will significantly increase the deterrent effect of the Dodd-Frank 
Act''); Cornell Securities Law Clinic (Apr. 11, 2022) (supporting 
the Commission's ``discretion to increase award amounts'' because 
``large awards generate more public interest''); NWC (Apr. 7, 2022) 
(stating the proposed amendment ``clarif[ies] that whistleblowers in 
large cases, who meet the criteria for enhanced awards, will not be 
prejudiced simply based on the size of a sanction'').
    \58\ See Andres Rodriquez (Apr. 3, 2022).
---------------------------------------------------------------------------

3. Final Rule
    The Commission has decided to amend Rule 21F-6 by adopting new 
paragraph (d) as proposed. For the reasons set forth in the proposing 
release and supported by the comments received on this proposal, this 
amendment will help strengthen the whistleblower program by encouraging 
high-quality tips from insiders and others who have original 
information relating to potential securities law violations.

C. Technical and Conforming Amendments to Rules 21-4(c), 21F-8(e), 21F-
10, and 21F-11

    In the proposing release, the Commission identified various 
technical amendments to Rules 21F-4(c) and 21F-8(c) to correct errors 
in the rule text. No comments were received on these proposed 
modifications. For the reasons explained in the proposing release, the 
Commission is adopting the proposed technical amendments to these 
rules.
    Further, the Commission proposed various amendments to Rules 21F-10 
and 21F-11 so that these rules conform to the changes that are being 
made to the Multiple-Recovery Rule and Rule 21F-6. The Commission did 
not receive comments specifically addressing these minor modifications 
and is adopting them for the reasons explained in the proposing 
release.\59\
---------------------------------------------------------------------------

    \59\ 87 FR 9280, 9284 n.24, 9290 n.57 (explaining conforming 
edits that are being made to Rules 21F-10 and 21F-11).
---------------------------------------------------------------------------

III. Effective Date and Other Matters

    The Commission received no comments on the proposed effective date. 
Accordingly, as proposed, the amended rules will become effective 30 
days after publication in the Federal Register. Further, the amendments 
shall apply to any award application pending as of the effective date 
of the rules, and to all future-filed award applications.
    If any of the provisions of these amendments, or the application of 
these provisions to any person or circumstance, is held to be invalid, 
such invalidity shall not affect other provisions or application of 
such provisions to other persons or circumstances that can be given 
effect without the invalid provision or application.

[[Page 54147]]

    Pursuant to the Congressional Review Act,\60\ the Office of 
Information and Regulatory Affairs has designated these amendments as 
not a ``major rule,'' as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    \60\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

    Lastly, the final amendments do not impose any new ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 
1995,\61\ nor do they create any new filing, reporting, recordkeeping, 
or disclosure requirements.
---------------------------------------------------------------------------

    \61\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

IV. Economic Analysis

    The Commission is sensitive to the economic consequences of its 
rules, including the benefits, costs, and effects on efficiency, 
competition, and capital formation. Section 23(a)(2) \62\ of the 
Exchange Act requires the Commission, in promulgating rules under the 
Exchange Act, to consider the impact that any rule may have on 
competition and prohibits the Commission from adopting any rule that 
would impose a burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. Further, Section 3(f) 
of the Exchange Act \63\ requires the Commission, when engaging in 
rulemaking where it is required to consider or determine whether an 
action is necessary or appropriate in the public interest, to consider, 
in addition to the protection of investors, whether the action will 
promote efficiency, competition, and capital formation.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78w(a)(2).
    \63\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    This economic analysis concerns the final amendments to Exchange 
Act Rule 21F-3 and Rule 21F-6. As discussed above, the final amendments 
to Rule 21F-3(b)(3) allow awards for related actions if an alternative 
whistleblower program has an award range or award cap that would 
restrict the maximum potential award from that other program to an 
amount that is meaningfully lower than the maximum potential award that 
the Commission could make. In addition, the final amendments allow 
awards for related actions when the alternative program has a 
discretionary structure, or when the maximum award the Commission could 
potentially pay on the non-SEC action could not exceed $5 million. The 
final amendment to Rule 21F-6 eliminates the Commission's discretion to 
consider the dollar amounts to reduce an award. Although the impact of 
the final amendments is expected to be small, to the extent that there 
is an impact, the amendments could increase the size of some 
whistleblower awards and therefore increase the incentives for 
whistleblowers to submit tips.
    The benefits and costs discussed below are difficult to quantify. 
For example, we do not have a way of estimating quantitatively the 
extent to which the final rules could affect our enforcement program by 
altering whistleblowing incentives. Similarly, we are unable to 
quantify any costs (or benefit) to the IPF \64\ associated with the 
Comparability Approach or the alternative approaches discussed above 
for amending Rule 21F-(b)(3). Therefore, the discussion of economic 
effects of the final amendments is qualitative in nature.
---------------------------------------------------------------------------

    \64\ See supra note 41 (discussing the IPF).
---------------------------------------------------------------------------

    We received several comments in response to the proposed rulemaking 
that suggest additional alternatives as well as comments that discuss 
the economic consequences of the rule changes that are being adopted. 
We respond to those comments below.

A. Economic Baseline

    In our examination of the potential economic effects of the final 
amendments, we have employed as a baseline the set of rules that 
implement the SEC's whistleblower program as amended in September 
2020.\65\ Over the past 10 years, the whistleblower program has been an 
important component of the Commission's efforts to detect wrongdoing 
and protect investors in the marketplace, particularly where fraud is 
difficult to uncover. The program has received a high number of 
submissions from whistleblowers and it has also produced substantial 
awards.\66\ Both the number of submissions and the number and dollar 
amount of awards per year have increased considerably since the program 
was initiated.\67\
---------------------------------------------------------------------------

    \65\ Earlier this year, the Commission issued a statement 
identifying procedures that could be used by the whistleblower award 
program during an Interim Policy-Review Period. Release No. 34-81207 
(Aug. 5, 2021), available at https://www.sec.gov/rules/policy/2021/34-92565.pdf. These procedures are considered in the economic 
baseline.
    \66\ In fiscal year (FY) 2021, the Commission awarded 
approximately $564 million to 108 individuals--both the largest 
dollar amount and the largest number of individuals awarded in a 
single fiscal year. The program was also very active in FY 2020, 
awarding approximately $175 million to 39 individuals.
    \67\ See SEC 2020 Report on Whistleblower Program, at 9-16; U.S. 
Sec. & Exch. Comm'n, Div. of Enf. 2020 Ann. Rep., pp. 9-16 (Nov. 2, 
2020), available at https://www.sec.gov/files/enforcement-annual-report-2020.pdf.

             SEC Whistleblower Program Annual Award Activity
------------------------------------------------------------------------
                                           Total awards      Number of
                  Year                       (million)      recipients
------------------------------------------------------------------------
2021....................................            $564             108
2020....................................             175              39
2019....................................              60               8
------------------------------------------------------------------------

    Whistleblower programs, including the SEC's whistleblower program, 
have been studied by economists who report findings consistent with 
award programs being effective at contributing to the discovery of 
violations.\68\ In addition, a recent publication reports that, among 
other benefits, ``[w]histleblower involvement [in the enforcement 
process] is associated with higher monetary penalties for targeted 
firms and employees.'' \69\ Further, published research articles and 
current working papers report that the SEC's whistleblower program 
deters aggressive (i.e., potentially misleading) financial reporting 
\70\ and insider trading.\71\ We have received comments that support 
the conclusion that the SEC's whistleblower program is valuable and 
effective.\72\
---------------------------------------------------------------------------

    \68\ Andrew C. Call, et al., Whistleblowers and Outcomes of 
Financial Misrepresentation Enforcement Actions, 56 J. Acct. Res. 
123, 126 (2018) (``Our collective findings are consistent with 
whistleblower involvement being associated with more rapid discovery 
of financial misconduct.''). See also Alexander Dyck, et al., Who 
Blows the Whistle on Corporate Fraud?, 65 J. Fin. 2213, 2215 (2010) 
(``[A] strong monetary incentive to blow the whistle does motivate 
people with information to come forward.'').
    \69\ Call, et al., supra note 68, at 126.
    \70\ See Philip G. Berger & Heemin Lee, Did the Dodd-Frank 
Whistleblower Provision Deter Accounting Fraud?, 60 J. ACCT. RES. 
1337, 1359 (2022) available at https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12421 (``for firms not exposed to a general 
[state] F[alse] C[laims] A[ct] before the Dodd-Frank whistleblower 
law, the new law lowers the probability of fraud by 12%-22% relative 
to firms already exposed.''); see also Christine Weidman & Chummei 
Zhu, Do the SEC Whistleblower Provisions of Dodd Frank Deter 
Aggressive Financial Reporting (Feb. 2020) (unpublished manuscript), 
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3105521; Jaron H. Wilde, The Deterrent Effect 
of Employee Whistleblowing on Firms' Financial Misreporting and Tax 
Aggressiveness, 92 ACCT. REV. 247 (2017).
    \71\ See Jacob Raleigh, The Deterrent Effect of Whistleblowing 
on Insider Trading (Sept. 29, 2021) (unpublished manuscript), 
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3672026.
    \72\ See, e.g., Taxpayers Against Fraud (Apr. 11, 2022) (``The 
success of the Whistleblower Program over the past decade clearly 
demonstrates the benefits to investors and the public at large when 
major frauds are detected, deterred and remedied as early as 
possible[.]''); id. (``The SEC's Whistleblower Program is developing 
into one of the most successful public-private partnerships in 
American history''); Better Markets (Apr. 11, 2022) (``[T]he [SEC's 
Whistleblower] program has been an enormous success.''). One 
commenter stated that ``the benefits obtained by the public and 
investors based on the deterrent effect of whistleblower laws are 
massive,'' and cited additional sources to support this conclusion. 
Kohn, Kohn, & Colapinto (Apr. 8, 2022).

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[[Page 54148]]

B. Final Rules

1. Final Rule 21F-3(b)(3)
    The rule amendments may affect SEC whistleblower awards in cases 
where there is a potential related action that could be covered by 
another whistleblower program. As described above, the Commission is 
adopting the Comparability Approach, which authorizes the Commission to 
make awards in particular situations where, under the Multiple-Recovery 
Rule, another award program would otherwise apply if that program has 
the more direct or relevant relationship to the underlying (non-
Commission) related action.\73\ The Comparability Approach will do this 
by authorizing the Commission to make an award irrespective of the 
related action's relative relationship to the two award programs if the 
other award program is discretionary, or structured to provide 
meaningfully smaller awards than the maximum potential award that could 
be granted by the SEC's program, or if the maximum total award amount 
that the Commission could pay is less than or equal to $5 million. The 
Whistleblower's Choice Option, by contrast, would have allowed the 
Commission to make an award irrespective of the existence of another 
program and would have allowed the whistleblower to decide whether to 
accept the Commission's award or the other program's award. While the 
two approaches are structured differently, both may increase the total 
dollar award amount for a whistleblower compared to the baseline. Thus 
both options could increase the incentives for whistleblowers.\74\
---------------------------------------------------------------------------

    \73\ It would be difficult to predict with any degree of 
certainty how often the Comparability Approach would be relevant, 
particularly as whistleblower programs change, and new whistleblower 
programs are implemented. That said, as discussed above, the 
Commission has seen an increase in the number of award matters that 
would potentially implicate the Comparability Approach.
    \74\ We considered comments that support the conclusion that the 
Comparability Approach and the Whistleblower's Choice Option would 
increase incentives for whistleblowers. See, e.g., Andres Rodriguez 
(Apr. 3, 2022) (stating ``With the proposed amendment to rule 21F-
3(b)(3), the Securities and Exchange Commission can further the 
maximization of whistleblower tips by means of providing monetary 
awards.''); Anonymous (Mar. 21, 2022) (``This will Induce [sic] and 
Incentivize [sic] those with a moral compass to come forward more 
often.'').
---------------------------------------------------------------------------

    The Whistleblower's Choice Option might have had a slightly 
different incentive effect, since a comparison would have been made 
between realizable award amounts rather than analysis of award 
structures.\75\ To the extent that a whistleblower prefers to exercise 
discretion over the selection of awards for the same related action, 
the whistleblower might have preferred the Whistleblower's Choice 
Option because the whistleblower would have had an opportunity to make 
a decision in every instance where another award program might have 
applied. In contrast, the Comparability Approach does not offer the 
whistleblower the opportunity to exercise discretion. Feedback from 
some commenters indicates that whistleblowers may prefer to exercise 
such discretion.\76\ As discussed above, however, the Whistleblower's 
Choice Approach could weaken the incentives for whistleblowers, since 
it might add significant delay to the processing of applications and/or 
payment of awards.\77\
---------------------------------------------------------------------------

    \75\ In theory, the Whistleblower's Choice Option could have 
resulted in larger awards than the Comparability Approach. For 
example, a comparable program, such as the CFTC's program, might 
potentially determine an award amount at 20 percent. If, in that 
case, the Commission would have exercised its discretion to 
determine an award at 30 percent for the related action, the 
whistleblower would have received a larger amount under the 
Whistleblower's Choice Option than under the Comparability Approach.
    \76\ See supra notes 21-22 and related discussion.
    \77\ See supra note 38 and accompanying discussion.
---------------------------------------------------------------------------

    To the extent that these amendments increase the willingness of 
some individuals to come forward with information about potential 
securities law violations, we expect that they will increase Commission 
enforcement activity and deter wrongdoing.\78\ The effects of the rule 
changes are expected to be small, due to the limited circumstances 
under which they will apply, and because there are many factors, 
including non-pecuniary incentives, that motivate whistleblowers.\79\ 
If this amendment had been operative during the period from July 21, 
2010, (when the program was created) to the present, staff review of 
award data indicates that this amendment would have resulted in an 
additional total payout from the IPF of less than $10.5 million. 
Although the rule amendments would not have substantially increased the 
total payout in prior related-action awards, the economic literature 
leads us to believe that changes such as these that increase 
whistleblowing incentives should have a positive effect on the 
frequency of whistleblowing activity.\80\
---------------------------------------------------------------------------

    \78\ We have received letters from commenters that support this 
expectation, see, e.g., National Whistleblower Center (Apr. 7, 2022) 
(``High rewards increase the likelihood that more whistleblowers 
will come forward to the SEC with their information.'').
    \79\ The mix of pecuniary and non-pecuniary elements that 
motivate whistleblowers were described in the economic analysis for 
the 2020 Adopting Release for Rule 21F-3(b)(3), Section VI.B.2, see 
Adopting Release, 85 FR 70937.
    \80\ See Andrew C. Call, et al., Rank and File Employees and the 
Discovery of Misreporting: The Role of Stock Options, 62 J. Acct. & 
Econ. 277, 297-99 (2016). See also Jonas Heese & Gerardo Perez-
Cavazos, The Effect of Retaliation Costs on Employee Whistleblowing, 
71 J. Acct. & Econ. 101385 (2021). See also Kohn, Kohn, & Colapinto 
(Apr. 8, 2022) (citing congressional testimony as well as other 
sources that indicate incentive changes have an effect on 
whistleblower participation).
---------------------------------------------------------------------------

    Because these amendments may increase the amounts paid to 
whistleblowers under certain circumstances, there may be costs 
associated with the final rule amendments. One possibility is that the 
IPF will be depleted temporarily.\81\ For example, assume the DOJ 
collected $1.5 billion on a related action. If there were a meritorious 
whistleblower, then even a mid-range 20 percent award would require the 
Commission to pay the whistleblower $300 million, an amount that could 
temporarily exhaust the IPF.\82\ An award that exhausted the IPF could 
produce additional effects, depending on the size of the shortfall and 
the SEC whistleblower awards that would otherwise be eligible for 
issuance and payment during the shortfall period.\83\
---------------------------------------------------------------------------

    \81\ 17 CFR 240.21F-14(d) (Exchange Act Section 21F-14(d)), 
which describes the procedures applicable to the payment of awards, 
indicates that if there are insufficient amounts available in the 
IPF to pay the entire amount of an award within a reasonable period 
of time, then the balance of the payment shall be paid when amounts 
become available. These procedures specify the relative priority of 
competing claims.
    \82\ See generally Exchange Act Section 21F(g)(3)(A). At the end 
of FY 2021, the IPF's balance was $144,442,134. To date, the largest 
amount the IPF has ever had is approximately $453 million. See 2013 
Annual Report to Congress on the Dodd-Frank Whistleblower Program 
available at https://www.sec.gov/files/annual-report-2013.pdf.
    \83\ See also Exchange Act Section 21F(c)(1)(B)(ii).
---------------------------------------------------------------------------

    In addition, we expect that these amendments will cause a small 
increase in the administrative costs for the SEC's whistleblower 
program. For example, the final adopted amendments will require the 
Commission to compare whistleblower programs based on the expected 
award amounts from those programs. But these costs will be small 
relative to the baseline, and, to the extent that the program 
structures are stable, the comparisons may not need to be repeated for 
each case. In contrast, the Whistleblower's Choice Option could have 
been expected to increase the administrative costs relative to the 
baseline more than the Comparability Approach because it would have

[[Page 54149]]

required the Commission to determine whether an award should have been 
granted in each case where there is a related action and a separate 
whistleblower program.\84\ As described above, commenters have provided 
mixed feedback regarding the relative increase in administrative costs 
for the Whistleblower's Choice Option as compared to the Comparability 
Approach.\85\
---------------------------------------------------------------------------

    \84\ The award presumption established by Rule 21F-6(c) could 
help limit the overall administrative costs, however. See Adopting 
Release, 85 FR 70911 (discussing potential ``gains in efficiency 
from streamlining the award determination process'' when the $5 
million award presumption would apply during the award-calculation 
phase).
    \85\ As discussed above, one commenter indicated that the 
administrative burdens associated with the Comparability Approach 
would be greater than those of the Whistleblower's Choice Option, 
supra note 10, but others indicated that the Comparability Approach 
would have low administrative burdens, supra note 11.
---------------------------------------------------------------------------

2. Final Rule 21F-6
    The change to Rule 21F-6 eliminates the Commission's discretionary 
authority to consider dollar amounts in reducing awards while retaining 
the Commission's discretionary authority to consider dollar amounts to 
increase awards. The 2020 amendments that clarified that the Commission 
could consider, in its discretion, the dollar amount of an award when 
making an award determination may have increased whistleblowers' 
uncertainty relating to the program and thus potentially reduced their 
willingness to report potential misconduct. To the extent that the 2020 
amendments may have diminished a whistleblower's willingness to come 
forward, eliminating this discretionary authority reduces uncertainty 
and thus potentially encourages more whistleblowing.\86\ But we cannot 
determine with any reasonable degree of certainty if the revisions to 
Rule 21F-6 will affect a whistleblower's willingness to report a 
potential securities law violation.\87\ To the extent that the 
Commission would have exercised the discretion to lower award amounts, 
amended Rule 21F-6 will increase program costs to the IPF by any such 
amounts.\88\
---------------------------------------------------------------------------

    \86\ See Taxpayers Against Fraud (Apr. 11, 2022) (stating that 
``in our experience representing whistleblowers, uncertainty and 
ambiguity in how the program operates can present potentially 
significant obstacles to individuals who are considering reporting 
wrongdoing'').
    \87\ As noted above, commenters have expressed support for the 
proposed changes to Rule 21F-6. See supra notes 57-58 and related 
discussion, indicating that larger awards generate important 
incentives.
    \88\ Similar to the amendments to Rule 21F-3(b)(3), to the 
extent that program costs increase as a result of the amendments to 
Rule 21F-6, there will be an increase in the possibility that the 
IPF is temporarily depleted. As described above, an award that 
exhausted the IPF could produce additional effects that would depend 
on the size of the shortfall and the SEC whistleblower awards that 
would otherwise have been eligible for issuance and payment during 
the shortfall period.
---------------------------------------------------------------------------

C. Additional Alternatives

    As discussed above, the Offset Approach and the Topping-Off 
Approach are alternatives that could also have increased whistleblower 
award incentives. For example, under certain circumstances, the Offset 
Approach could have produced award amounts in related actions that are 
comparable, if not identical, to the awards produced under the 
Comparability Approach (and the Whistleblower's Choice Approach). In 
contrast, the Topping-Off Approach could have resulted in smaller 
changes in the award amounts.\89\
---------------------------------------------------------------------------

    \89\ As described above, the Topping-Off Approach would not have 
allowed the Commission to provide an increase to the covered-action 
in those instances where the Commission grants an award at the 30 
percent statutory cap, which occurs in a substantial portion of 
cases.
---------------------------------------------------------------------------

    As also discussed above, both of these alternative approaches would 
likely have increased the Commission's award-processing time, because 
the Commission's final award-amount determinations would have been 
dependent on the completion and resolution of the award process by the 
entity or authority administering the other award program.\90\ 
Additional delays may adversely affect whistleblower incentives.\91\ As 
a result, despite the generally positive expected impact on 
whistleblower incentives from the possibility for increased award 
amounts, the net impact on whistleblower incentives from the Offset 
Approach and the Topping-Off Approach would have depended on the 
relative impacts of potential increased awards and potential increased 
delays.\92\
---------------------------------------------------------------------------

    \90\ Commenters suggested modifications to the Offset Approach 
to address this concern. See Taxpayers Against Fraud (Apr. 11, 2022) 
(``The only issue relates to timing--if SEC makes its award first, 
the whistleblower forfeits an award from any other program; if the 
other regulator pays first, the SEC offsets whatever amount the 
whistleblower receives with whatever amount he or she received from 
other programs.''); Kohn, Kohn & Colapinto (Apr. 8, 2022). But as 
discussed in Section II.A.3, the Commission would be required to 
withhold any payment to avoid the risk of overpaying.
    \91\ Some commenters have expressed concerns about award-
processing delays. See, e.g., Talia Finamore (Apr. 3, 2022) (``My 
only worry would be how much more time the Commission would have to 
put into processing applications.'').
    \92\ As described above, we have considered several additional 
alternatives suggested by commenters. For example, one commenter 
suggested that the $5 million threshold in the Comparability 
Approach should be raised to $20 million. See supra note 15.
---------------------------------------------------------------------------

D. Effects of the Proposed Rules on Efficiency, Competition, and 
Capital Formation

    As discussed earlier, the Commission is sensitive to the economic 
consequences of its rules, including the effects on efficiency, 
competition, and capital formation. The Commission believes that the 
final amendments would make incremental changes to its whistleblower 
program. Thus, the Commission does not anticipate the effects on 
efficiency, competition, and capital formation to be significant.
    The final rules could have a positive indirect impact on investment 
efficiency and capital formation by increasing the incentives of 
potential whistleblowers to provide information on possible violations. 
To the extent that increased whistleblowing incentives stemming from 
the final rules result in more timely reporting of useful information 
on possible violations or the reporting of higher quality information 
on possible violations, the Commission's enforcement activities could 
become more effective. More effective enforcement could lead to earlier 
detection of violations and increased deterrence of potential future 
violations, which could improve price efficiency and assist in a more 
efficient allocation of investment funds. Securities frauds, for 
example, can cause inefficiencies in the economy by diverting 
investment funds from legitimate, productive uses.\93\
---------------------------------------------------------------------------

    \93\ See Adopting Release, 76 FR 34362.
---------------------------------------------------------------------------

V. Regulatory Flexibility Act

    Section 604(a) of the Regulatory Flexibility Act \94\ requires the 
Commission to undertake a final regulatory flexibility analysis of 
rules it is adopting unless the Commission certifies that the rules 
would not have a significant economic impact on a substantial number of 
small entities.\95\ The proposing release included a request for public 
comment on the Commission's preliminary regulatory-flexibility analysis 
but no such comments were received.
---------------------------------------------------------------------------

    \94\ 5 U.S.C. 603(a).
    \95\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    Under Section 601(6) of Title 5 of the United States Code, ``small 
authority'' means ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' \96\ The definition of ``small 
authority'' does not include individuals. As explained in the proposing 
release, the rules apply only to an individual, or individuals acting 
jointly, who provide

[[Page 54150]]

information to the Commission relating to the violation of the 
securities laws. Companies and other entities are not eligible to 
participate in the whistleblower program as whistleblowers.\97\ 
Consequently, the persons that will be subject to the amended rules are 
not ``small entities'' for purposes of the Regulatory Flexibility Act.
---------------------------------------------------------------------------

    \96\ See 5 U.S.C. 601(3) through(5) (defining ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction'').
    \97\ See generally Exchange Act Section 21F(a)(6) (defining 
``whistleblower''); Rule 21F-2(a)(2) (providing that ``[a] 
whistleblower must be an individual'' and a ``company or other 
entity is not eligible to be a whistleblower'').
---------------------------------------------------------------------------

    For the reasons stated above, the Commission certifies, pursuant to 
Section 605(b) of Title 5 of the U.S. Code, that the rules would not 
have a significant economic impact on a substantial number of small 
entities.\98\
---------------------------------------------------------------------------

    \98\ The final amendments do not impose any new ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 
1995 [44 U.S.C. 3501 et seq.], nor do they create any new filing, 
reporting, recordkeeping, or disclosure requirements.
---------------------------------------------------------------------------

VI. Statutory Basis

    The Commission is adopting the rule amendments contained in this 
document under the rulemaking authority provided in Sections 3(b), 21F, 
and 23(a) of the Exchange Act.

List of Subjects in 17 CFR Part 240

    Securities, Whistleblowing.

Text of the Amendments

    For the reasons set out in the preamble, title 17, chapter II of 
the Code of Federal Regulations is amended to read as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
1. The authority citation for part 240 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et 
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
    Section 240.21F is also issued under Public Law 111-203, 922(a), 
124 Stat. 1841 (2010).
* * * * *

0
2. Amend Sec.  240.21F-3 by:
0
a. Revising paragraphs (b)(3) introductory text and (b)(3)(i) and 
(iii); and
0
b. Adding paragraphs (b)(3)(iv), (v), and (vi).
    The revisions and additions read as follows:


Sec.  240.21F-3   Payment of awards.

* * * * *
    (b) * * *
    (3) The following provision shall apply where a claimant's 
application for a potential related action may also involve a potential 
recovery from a comparable whistleblower award program (as defined in 
paragraph (b)(3)(iv) of this section) for that same action.
    (i) Notwithstanding paragraph (b)(1) of this section, if a judicial 
or administrative action is subject to a separate monetary award 
program established by the Federal Government, a state government, or a 
self-regulatory organization (SRO), the action will be deemed eligible 
to qualify as a potential related-action only if either:
    (A) The Commission finds that the maximum total award that could 
potentially be paid by the Commission based on the monetary sanctions 
imposed would not exceed $5 million; or
    (B) The Commission finds (based on the facts and circumstances of 
the action) that the Commission's whistleblower award program has the 
more direct or relevant connection to that action.
* * * * *
    (iii) The conditions in paragraphs (b)(3)(iii)(A) through (C) of 
this section apply to a determination under paragraph (b)(3)(ii) of 
this section.
    (A) The Commission shall not make a related-action award to a 
claimant (or any payment on a related-action award if the Commission 
has already made an award determination) if the claimant receives any 
payment from the other program for that action.
    (B) If a claimant was denied an award by the other award program, 
the claimant will not be permitted to re-adjudicate any issues before 
the Commission that the governmental/SRO entity responsible for 
administering the other whistleblower award program resolved, pursuant 
to a final order of such government/SRO entity, against the claimant as 
part of the award denial.
    (C) If the Commission makes an award before an award determination 
is finalized by the governmental/SRO entity responsible for 
administering the other award program, the award shall be conditioned 
on the claimant making an irrevocable waiver of any claim to an award 
from the other award program. The claimant's irrevocable waiver must be 
made within 60 calendar days of the claimant receiving notification of 
the Commission's final order.
    (iv) The provisions of paragraphs (b)(3)(iv)(A) through (D) of this 
section apply to program comparability determinations.
    (A) For purposes of paragraph (b)(3) of this section, a comparable 
whistleblower award program is an award program that satisfies the 
following criteria:
    (1) The award program is administered by an authority or entity 
other than the Commission;
    (2) The award program does not have an award range that could 
operate in a particular action to yield an award for a claimant that is 
meaningfully lower (when assessed against the maximum and minimum 
potential awards that program would allow) than the award range that 
the Commission's program could yield (i.e., 10 to 30 percent of 
collected monetary sanctions);
    (3) The award program does not have a cap that could operate in a 
particular action to yield an award for a claimant that is meaningfully 
lower than the maximum award the Commission could grant for the action 
(i.e., 30 percent of collected monetary sanctions in the related 
action); and
    (4) The authority or entity administering the program may not in 
its discretion deny an award if a whistleblower satisfies the 
established eligibility requirements and award criteria.
    (B) The Commission shall make a determination on a case-by-case 
basis whether an alternative award program is a comparable award 
program for purposes of the particular action on which the claimant is 
seeking a related-action award with respect to paragraphs 
(b)(3)(iv)(A)(2) through (3) of this section.
    (C) If the Commission determines that an alternative award program 
is not comparable, the Commission shall condition its award on the 
meritorious whistleblower making within 60 calendar days of receiving 
notification of the Commission's final award an irrevocable waiver of 
any claim to an award from the other award program.
    (D) A whistleblower whose related-action award application is 
subject to the provisions of paragraph (b)(3) of this section 
(including a whistleblower whose related-action award application 
implicates another award program that does not qualify as a comparable 
program as a result of paragraph (b)(3)(iv)(A) of this section) must 
demonstrate that the whistleblower has complied with the terms and 
conditions of this section regarding an irrevocable waiver. This shall 
include taking all

[[Page 54151]]

steps necessary to authorize the administrators of the other program to 
confirm to staff in the Office of the Whistleblower (or in writing to 
the claimant or the Commission) that an irrevocable waiver has been 
made.
    (v) A claimant seeking a related-action award must promptly inform 
the Office of the Whistleblower if the claimant applies for an award on 
the same action from another award program.
    (vi) The Commission may deem a claimant ineligible for a related-
action award if any of the conditions and requirements of paragraph 
(b)(3) of this section in connection with that related action are not 
satisfied.

0
3. Amend Sec.  240.21F-4 by revising paragraph (c)(2) to read as 
follows:


Sec.  240.21F-4  Other definitions.

* * * * *
    (c) * * *
    (2) You gave the Commission original information about conduct that 
was already under examination or investigation by the Commission, the 
Congress, any other authority of the Federal Government, a state 
attorney general or securities regulatory authority, any self-
regulatory organization, or the PCAOB (except in cases where you were 
an original source of this information as defined in paragraph (b)(5) 
of this section), and your submission significantly contributed to the 
success of the action; or
* * * * *

0
4. Amend Sec.  240.21F-6 by adding paragraph (d) to read as follows:


Sec.  240.21F-6  Criteria for determining amount of award.

* * * * *
    (d) Consideration of the dollar amount of an award. When applying 
the award factors specified in paragraphs (a) and (b) of this section, 
the Commission may consider the dollar amount of a potential award for 
the limited purpose of increasing the award amount. The Commission 
shall not, however, use the dollar amount of a potential award as a 
basis to lower a potential award, including when applying the factors 
specified in paragraphs (a) and (b) of this section.

0
5. Amend Sec.  240.21F-8 by revising paragraph (e)(4)(ii) to read as 
follows:


Sec.  240.21F-8  Eligibility and forms.

* * * * *
    (e) * * *
    (4) * * *
    (ii) If, within 30 calendar days of the Office of the Whistleblower 
providing the foregoing notification, you withdraw the relevant award 
application(s), the withdrawn award application(s) will not be 
considered by the Commission in determining whether to exercise its 
authority under paragraph (e) of this section.

0
6. Amend Sec.  240.21F-10 by revising paragraph (e) to read as follows:


Sec.  240.21F-10  Procedures for making a claim for a whistleblower 
award in SEC actions that result in monetary sanctions in excess of 
$1,000,000.

* * * * *
    (e) You may contest the Preliminary Determination made by the 
Claims Review Staff by submitting a written response to the Office of 
the Whistleblower setting forth the grounds for your objection to 
either the denial of an award or the proposed amount of an award. The 
response must be in the form and manner that the Office of the 
Whistleblower shall require. You may also include documentation or 
other evidentiary support for the grounds advanced in your response. In 
applying the award factors and standards specified in Sec.  240.21F-6, 
and determining the award dollar and percentage amounts set forth in 
the Preliminary Determination, the award factors may be considered by 
the SEC staff and the Commission in dollar terms, percentage terms or 
some combination thereof, subject to the limitations imposed by Sec.  
240.21F-6(d). Should you choose to contest a Preliminary Determination, 
you may set forth the reasons for your objection to the proposed amount 
of an award, including the grounds therefore, in dollar terms, 
percentage terms or some combination thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within 30 calendar days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) that formed the basis of the Claims Review Staff's 
Preliminary Determination.
    (ii) Within 30 calendar days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required, and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you 
must submit your written response and supporting materials within 60 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1) of 
this section, then within 60 calendar days of the Office of the 
Whistleblower making those materials available for your review.
* * * * *

0
7. Amend Sec.  240.21F-11 by revising paragraphs (a), (c), and (e) to 
read as follows:


Sec.  240.21F-11   Procedures for determining awards based upon a 
related action.

    (a) If you are eligible to receive an award following a Commission 
action that results in monetary sanctions totaling more than 
$1,000,000, you also may be eligible to receive an award in connection 
with a related action (as defined in Sec.  240.21F-3(b)).
* * * * *
    (c) The Office of the Whistleblower may request additional 
information from you in connection with your claim for an award in a 
related action to demonstrate that you directly (or through the 
Commission) voluntarily provided the governmental/SRO entity (as 
specified in Sec.  240.21F-3(b)(1)) the same original information that 
led to the Commission's successful covered action, and that this 
information led to the successful enforcement of the related action. 
Further, the Office of the Whistleblower, in its discretion, may seek 
assistance and confirmation from the governmental/SRO entity in making 
an award determination. Additionally, if your related-action award 
application might implicate a second whistleblower program, the Office 
of the Whistleblower is authorized to request information from you or 
to contact any authority or entity responsible for administering that 
other program, including disclosing the whistleblower's identity if 
necessary, to ensure compliance with the terms of Sec.  240.21F-
3(b)(3).
* * * * *
    (e) You may contest the Preliminary Determination made by the 
Claims Review Staff by submitting a written response to the Office of 
the Whistleblower setting forth the grounds for your objection to 
either the denial of an award or the proposed amount of an award. The 
response must be in the form and manner that the Office of the 
Whistleblower shall require. You may also include documentation or 
other evidentiary support for the grounds advanced in your response. In 
applying the award factors and standards specified in Sec.  240.21F-6, 
and determining the award dollar and percentage amounts set forth in 
the Preliminary Determination, the award factors may be considered by 
the SEC staff and the Commission in dollar terms, percentage terms or 
some combination thereof, subject to the

[[Page 54152]]

limitations imposed by Sec.  240.21F-6(d). Should you choose to contest 
a Preliminary Determination, you may set forth the reasons for your 
objection to the proposed amount of an award, including the grounds 
therefore, in dollar terms, percentage terms or some combination 
thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within 30 calendar days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) that formed the basis of the Claims Review Staff's 
Preliminary Determination.
    (ii) Within 30 calendar days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required, and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you 
must submit your written response and supporting materials within 60 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1) of 
this section, then within 60 calendar days of the Office of the 
Whistleblower making those materials available for your review.
* * * * *

    By the Commission.

    Dated: August 26, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022-18842 Filed 9-1-22; 8:45 am]
BILLING CODE 8011-01-P