Whistleblower Program Rules

Federal RegisterNov 5, 2020

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-89963; File No. S7-16-18]

RIN 3235-AM11

Whistleblower Program Rules

AGENCY:

Securities and Exchange Commission.

ACTION:

Final rule.

SUMMARY:

The Securities and Exchange Commission (“Commission”) is adopting several amendments to the Commission's rules implementing its congressionally mandated whistleblower program. Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) provides, among other things, that the Commission shall pay—under regulations prescribed by the Commission and subject to certain limitations—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 related action, an aggregate amount, determined in the Commission's discretion, that is equal to not less than 10 percent, and not more than 30 percent, of monetary sanctions that have been collected in the covered or related actions. The Commission is adopting various amendments that are intended to provide greater transparency, efficiency and clarity to whistleblowers, to ensure whistleblowers are properly incentivized, and to continue to properly award whistleblowers to the maximum extent appropriate and with maximum efficiency. The Commission is also making several technical amendments, and adopting interpretive guidance concerning the term “independent analysis.”

DATES:

The final rules are effective December 7, 2020. For application dates for each amendment, see the table in Section III.

FOR FURTHER INFORMATION CONTACT:

Emily Pasquinelli, Office of the Whistleblower, Division of Enforcement, at (202) 551-5973; Nicole Kelly, Office of the General Counsel, at (202) 551-4408, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

The Commission is amending the following rules and adopting a new rule.

Amendments

Commission reference

CFR citation (17 CFR)

Rule 21F-2

§ 240.21F-2

Rule 21F-3

§ 240.21F-3

Rule 21F-4

§ 240.21F-4

Rule 21F-6

§ 240.21F-6

Rule 21F-7

§ 240.21F-7

Rule 21F-8

§ 240.21F-8

Rule 21F-9

§ 240.21F-9

Rule 21F-10

§ 240.21F-10

Rule 21F-11

§ 240.21F-11

Rule 21F-12

§ 240.21F-12

Rule 21F-13

§ 240.21F-13

New Rule

Rule 21F-18

§ 240.21F-18

I. Background and Summary

A. The Whistleblower Award Program

B. Procedural Background and Summary of the Amendments Being Adopted

II. Description of Final Rule Amendments

A. Rule 21F-4(d)—Definition of “action”

B. Rule 21F-4(e)—Definition of “monetary sanctions”

C. Amendments to Exchange Act Rule 21F-3(b) Defining “related action”

D. Rule 21F-6(c)—Establishment of a Presumption of the Maximum Statutory Amount for Certain Awards

E. Rule 21F-6—Consideration of Dollar or Percentage Amounts in Applying the Award Factors

G. Amendment to Exchange Act Rule 21F-2—Whistleblower Status, Award Eligibility, and Confidentiality and Retaliation Protection

H. Rule 21F-8(d)—Forms Used for Whistleblower Program

I. Rule 21F-8(e)—Claimants Who Submit False Information or Abuse Award Application Process

J. Rule 21F-9—Procedures for Submitting Original Information

K. Amendments to Exchange Act Rule 21F-12—Materials That May Form the Basis of the Commission's Award Determination

L. Amendment to Exchange Act Rule 21F-13—The Administrative Record on Appeal

M. Adoption of Exchange Act Rule 21F-18—Summary Disposition Process

N. Technical Amendment to Rule 21F-4(c)(2)

O. Interpretive Guidance Regarding the Meaning and Application of “independent analysis”

III. Effective Date and Applicability Dates

IV. Other Matters

V. Paperwork Reduction Act

VI. Economic Analysis

A. Economic Baseline

B. Analysis of Benefits, Costs, and Economic Effects of the Adopted Rules

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

VII. Regulatory Flexibility Act

VIII. Statutory Basis

I. Background and Summary

The Commission's whistleblower program has made important contributions to the agency's efforts to enforce the federal securities laws. Original information provided by whistleblowers has led to enforcement actions in which the Commission has obtained more than $2.5 billion in financial remedies, including more than $1.4 billion in disgorgement of ill-gotten gains and interest, of which almost $750 million has been or is scheduled to be returned to harmed investors. In recognition of the important contributions of whistleblowers, the Commission has ordered over $523 million to 97 individuals in 80 enforcement actions whose original information led to the success of Commission actions and, in some instances, related actions brought by other enforcement authorities against wrongdoers.

A. The Whistleblower Award Program

Congress established the Commission's whistleblower program in July 2010 by adding Section 21F to the Exchange Act. Among other things, Section 21F directs that the Commission pay awards, subject to certain limitations and conditions, to whistleblowers who voluntarily provide the Commission with original information about a violation of the securities laws that leads to the successful enforcement of a covered judicial or administrative action.

Section 21F also directs that the awards must be an aggregate amount (the “Award Amount”), determined in the Commission's discretion, that is equal to not less than 10 percent, and not more than 30 percent, of what has been collected in the monetary sanctions imposed in the covered action and certain related actions.

Further, Section 21F provides that monetary awards to whistleblowers shall be paid from a special fund that Congress established called the Investor Protection Fund (“IPF”).

15 U.S.C. 78u-6(a)(1).

15 U.S.C. 78u-6(a)(5).

The IPF, which was established as part of the whistleblower program, is a statutorily established fund overseen by the U.S. Department of the Treasury that serves primarily as the funding source for the Commission's whistleblower awards. Additionally, as detailed in Exchange Act Section 21F(g)(3), 15 U.S.C. 78u-6, the IPF has a statutorily created self-replenishing process and is not contingent on annual appropriations from Congress.

In May 2011, the Commission adopted a set of rules to implement the whistleblower program. Those rules, which are codified at 17 CFR 240.21F-1 through 17, provide the operative

definitions, requirements, and processes related to the whistleblower program. Among other things, these rules define key terms and phrases in Section 21F, specify the form and manner through which an individual must submit information to qualify for an award, and establish the procedures for determining the Award Amounts.

B. Procedural Background and Summary of the Amendments Being Adopted

On June 28, 2018, the Commission proposed for public comment a package of rule amendments to the Commission's existing whistleblower rules (

see

Exchange Act Rules 21F-1 through 21F-17). These amendments were designed to enhance claim processing efficiency, clarify and bring greater transparency to the framework the Commission utilizes to exercise its discretion in determining Award Amounts, and otherwise address specific issues that have developed during the ten-year history of the whistleblower program.

For example, the amendments are intended to provide additional efficiency and transparency to the extent possible regarding the application of the existing award factors specified in Rule 21F-6(a) and (b) (the “Award Factors”), individually and collectively, particularly for awards where the statutory maximum award of 30 percent is $5 million or less, which represent the vast majority (in number) of all awards.

Additionally, because whistleblowers entitled to receive awards pursuant to the Commission's rules should receive their awards as quickly as reasonably practicable, the Commission is implementing mechanisms to increase the effectiveness and efficiency of its award determination process.

While the Commission has made a number of larger awards, the substantial majority of all awards were $5 million or less. The specific data regarding the Commission's whistleblower awards is detailed in the “Economic Analysis” section below. This information has informed our efforts to enhance the performance of the program.

The Commission received over 150 substantively distinct comment letters from approximately 100 commenters.

In addition, the Commission received three form letters from over 9,300 commenters.

A number of commenters submitted multiple letters.

The Commission did not investigate the circumstances under which each of these approximately 9,300 commenters submitted a form letter, including whether they submitted the letter of their own accord, were solicited to submit the letter, or provided informed consent to submit the letter.

The Commission has carefully considered the comments received. As a threshold matter, we note that the Commission's discretion in determining Award Amounts, and the manner in which the Commission exercises that discretion, was a focus for many commenters. The Commission recognizes that its articulation of the manner in which the Commission exercises its authority to determine Award Amounts should be clarified. Accordingly, the Commission is adopting a provision that clarifies the Commission's broad discretion when applying the Award Factors and determining the Award Amount, including the discretion to consider and apply the Award Factors in percentage terms, dollar terms or some combination of percentage terms and dollar terms when determining the Award Amount. Aside from clarifying the Commission's broad discretion, the Commission is adopting the rules substantially as proposed with one exception. Specifically, the Commission is not adopting proposed Rule 21F-6(d)(2), which would have provided a specific process for the Commission to exercise its discretion to review certain larger awards (exceeding $30 million to an individual whistleblower) under certain circumstances.

Although the Commission did not intend to create a new restriction on, or affect the size of, Award Amounts, this proposed rule was misperceived by some as a potential new restriction on Award Amounts. The proposed rule was one component of the Commission's effort to provide greater transparency, efficiency and certainty to the Award Amount determination process. Based on the comments received, the Commission's further analysis of the operation of the whistleblower program to date and the more comprehensive clarifying amendments being adopted, the Commission does not believe that proposed Rule 21F-6(d)(2) is necessary. Further, as discussed below in Section II(E), based on these same factors and with a focus on increased transparency, efficiency and clarity, we are adding a specific provision to Rule 21F-6 that will create a presumption that, when (1) the statutory maximum authorized Award Amount is $5 million or less and (2) the negative Award Factors are not present, the Award Amount will be set at the statutory maximum, subject to the Commission's discretion to apply certain exclusions. Aside from this presumption, the process for recommendations by the Claims Review Staff (“CRS”) and the Office of the Whistleblower is not changing. Awards of this type—where the maximum statutory award of 30 percent is $5 million or less—make up the vast majority (in number) of all whistleblower awards to date. Consistent with the Commission's view that encouraging whistleblowers to come forward is important, the Commission believes any potential whistleblower should understand that where the aggregate maximum award for the actions resulting from that whistleblower's original information is likely to be $5 million or less (and where the negative Award Factors are not present), Rule 21F-6(c) will generally result in an Award Amount that is the statutory maximum.

In addition to providing potential whistleblowers with greater transparency and certainty, this presumption should increase efficiency in the award review process.

Of the total 74 awards by enforcement action as of July 31, 2020, including awards above and below $5 million, 31 awards were at the statutory maximum and an additional 16 received close to the maximum amount (in the top quarter of the range,

i.e.

25% to 29%).

Below is a summary of the principal amendments to the Commission's whistleblower rules that are being adopted:

• Allowing awards based on deferred prosecution agreements (“DPAs”) and non-prosecution agreements (“NPAs”) entered into by the U.S. Department of Justice (“DOJ”) or a settlement agreement entered into by the Commission outside of a judicial or administrative proceeding to address violations of the securities laws;

• Consistent with the Commission's practice in award determinations to date, clarifying the current definition of related action to make clear that recovery from the Commission for the related action is not available where the Commission determines that a separate whistleblower award program more appropriately applies to the non-Commission action;

• Providing a specific process presumptively setting Award Amounts at the top end of the range when the statutory maximum award of 30 percent is $5 million or less and the negative Award Factors are not present, subject to the discretion of the Commission to apply certain exclusions;

• Clarifying the Commission's broad discretion when applying the Award Factors in Rule 21F-6(a) and (b) and setting Award Amounts, including the discretion to consider the Award Factors in percentage terms, dollar terms or some combination thereof; and

• Revising the Commission's definition of “whistleblower” in light of

the Supreme Court's decision in

Digital Realty Trust, Inc.

Somers,

and making certain related clarifications to Rule 21F-2 to address various other interpretive questions that have arisen in connection with the Court's holding.

Digital Realty Trust, Inc.

Somers,

138 S. Ct. 767 (2018).

In addition to the foregoing amendments, the Commission is adopting several other amendments to our whistleblower rules that are intended to clarify and enhance certain policies, practices, and procedures in implementing the program. The Commission is revising Exchange Act Rule 21F-4(e) to clarify the definition of “monetary sanctions.” Further, the Commission is revising Exchange Act Rule 21F-9 to provide the agency with additional flexibility to modify the manner in which individuals may submit Form TCR (Tip, Complaint or Referral) and to provide a new mechanism for individuals who failed to timely comply with the requirements of subparagraphs (a) and (b) of Rule 21F-9 to obtain an award if the Commission can readily determine that they clearly qualify for an award. Additionally, the Commission is adopting revisions to Exchange Act Rule 21F-8 to provide the agency with additional flexibility regarding the forms used in connection with the whistleblower program,

revisions to Exchange Act Rule 21F-12 to clarify the list of materials that the Commission may rely upon in making an award determination, and revisions to Rule 21F-13 to clarify the materials that may be part of the administrative record for purposes of judicial review.

17 CFR 249.1800-1801.

Two further changes are designed to help increase the Commission's efficiency in processing whistleblower award applications. The Commission is adding a new paragraph (e) to Exchange Act Rule 21F-8 to clarify the agency's ability to bar individuals from submitting whistleblower award applications when they are found to have submitted false information in violation of Exchange Act Section 21F(i) and Rule 8(c)(7) thereunder, as well as to afford the Commission the ability to bar individuals who repeatedly make frivolous award claims in Commission actions. The Commission is also adding new Exchange Act Rule 21F-18 to create a summary disposition procedure for certain types of common denials, such as untimely award applications and applications involving a tip that was not provided to the Commission in the form and manner that the Commission's rules require. Under this new summary disposition process, the Office of the Whistleblower may issue the preliminary award denial in a limited class of relatively straightforward matters; for all other award applications our current award-processing procedures as specified in Rule 21F-10 will continue to apply, which, among other things, means that the preliminary award determination will be issued by the CRS and not the Office of the Whistleblower.

Exchange Act Rule 21F-10(d) and Rule 21F-11(d) authorize the CRS to make a preliminary determination on an award application for a covered action and related action, respectively. Further, in accordance with Section 4A(b) of the Exchange Act, both rules now clarify that Commission will be provided the opportunity to review any preliminary determination before it is provided to a claimant.

See id.

(providing that “the Commission shall retain a discretionary right to review” actions taken “[w]ith respect to the delegation of any of [the Commission's] functions”).

Also, the Commission is adopting interpretive guidance to help clarify the meaning of “independent analysis” as that term is defined in Exchange Act Rule 21F-4(b)(3) and used in the definition of “original information.”

Further, the Commission is specifying the applicability dates for each rule amendment that we are adopting.

In addition to the amendments and other modifications described above, we are adopting a technical correction to Exchange Act Rule 21F-4(c)(2), to modify an erroneous internal cross-reference, as well as several technical modifications to Exchange Act Rules 21F-9, 10, 11, and 12, to accommodate certain of the substantive and procedural changes described above.

Finally, the Commission received a number of comments in response to the proposing release requesting additional transparency related to the administration of the whistleblower program. The Commission has considered these concerns and the following actions are in response to them.

The Commission is directing that the Office of the Whistleblower will include in its annual reports to Congress (beginning with the fiscal year 2020 report), in an aggregated manner, an overview discussion of the factors that were present in the awards throughout the year, including (to the extent practicable) a qualitative discussion of how these factors affected the Commission's determination of Award Amounts. The Office of the Whistleblower will continue to make available on its web page, and will review and update as necessary on not less than an annual basis, information regarding its approach to processing whistleblower award claims, including the initial review and prioritization of award claims.

None of the measures discussed in this paragraph are intended to create any enforceable rights. The measures discussed have no legal force or effect; they do not alter or amend applicable law, and create no new or additional obligations for any person.

This information is available at

https://www.sec.gov/files/OWB%20Approach%20to%20Processing%20Award%20Claims.pdf.

II. Description of Final Rule Amendments

A. Rule 21F-4(d)—Definition of “action”

1. Proposed Rule

Section 21F of the Exchange Act requires the Commission to pay whistleblower awards, with certain limitations and subject to certain conditions, in relation to the “successful enforcement” of “any covered judicial or administrative action” brought by the Commission and certain “related [judicial or administrative] actions” of other governmental entities, most notably DOJ.

The Commission proposed to add a new paragraph (3) to existing Rule 21F-4(d) (defining an “action”) to provide that the term “administrative action” includes a deferred prosecution agreement (“DPA”) or a non-prosecution agreement (“NPA”) entered into by DOJ or a state attorney general in a criminal case as well as a settlement agreement entered into by the Commission outside of the context of a judicial or administrative proceeding to address violations of the securities laws; and further that any money required to be paid in such actions will be deemed a “monetary sanction” within the meaning of Rule 21F-4(e). This proposed addition to Rule 21F-4 sought to make awards available to meritorious whistleblowers in cases where these alternative vehicles are used to address violations of law. Its premise was the same as that underlying current Rule 21F-4(d)(1): Our view that Congress did not intend for meritorious whistleblowers to be denied awards simply because of the procedural vehicle that the Commission (or another governmental entity) has selected to resolve an enforcement matter.

15 U.S.C. 78u-6(b)(1). A “covered judicial or administrative action” is any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1 million.

Id.

78u-6(a)(1). A “related action” is a judicial or administrative action brought by any of several governmental entities designated in the statute that is based upon the original information provided by a whistleblower that led to successful enforcement of a Commission covered action.

Id.

78u-6(a)(5). Awards range between 10 percent and 30 percent “of what has been collected of the monetary sanctions imposed” in the action.

Id.

78u-6(b)(1)(A), 78u-6(b)(1)(B).

2. Comments Received

Most of the commenters who addressed proposed Rule 21F-4(d)(3) supported it.

Commenters generally agreed that the rule would reduce uncertainty for potential whistleblowers and supported the rationale stated in the proposed rule of assuring that the availability of a whistleblower award not depend on the procedural vehicle that the Government may use to resolve an enforcement matter.

See

letters from Anat R. Admati, Faculty Director, and Graham Scott Steele, Director, Corporations and Society Initiative, Stanford University Graduate School of Business (Sept. 18, 2018) (“Admati and Steele Letter”); Americans for Financial Reform Education Fund (Sept. 18, 2018) (“AFREF Letter”); Better Markets (Sept. 18, 2018) (“Better Markets Letter”); Securities Industry and Financial Markets Association (Sept. 18, 2018) (“SIFMA Letter”); Cohen Milstein Sellers & Toll PLLC (Sept. 17, 2018) (“Cohen Milstein Letter”); Richard Jansson (June 5, 2019) (“Jansson Letter”); Eileen Morrell (Sept. 17, 2018) (“Morrell Letter”); Harry Markopolos (Sept. 14, 2018) (“Markopolos Letter”); Joe Fischer (Aug. 9, 2018) (“Fischer Letter”); Peter Sivere dated July 13, 2018, Aug. 14, 2018, Aug. 16, 2018, Aug. 20, 2018 (two letters submitted on this date), Aug. 21, 2018, Aug. 27, 2018 (two letters submitted on this date), Sept. 2, 2018 (two letters submitted on this date), Sept. 10, 2018, and Sept. 14, 2018 (collectively “Sivere” unless specified by date); Think Computer Foundation (July 17, 2018) (“Think Computer Letter”); Taxpayers Against Fraud (Sept. 18, 2018) (“TAF Letter”); G. Johnson (July 29, 2018) (“Johnson Letter”); Anonymous-88 (July 28, 2018), (“Anonymous-88 Letter”).

See

Admati and Steele Letter; AFREF Letter; Cohen Milstein Letter; Jansson Letter; Fischer Letter; TAF Letter; Johnson Letter.

One commenter emphasized the important role that DPAs and NPAs play in fostering corporate compliance, cooperation, and remediation.

This commenter offered that it would be contrary to the public interest if, in encouraging vigorous compliance programs and extraordinary cooperation in investigations, DOJ or the Commission decided not to offer a company a DPA or an NPA for fear that, as a result, a meritorious whistleblower would not receive an award. Similarly, this commenter stated that it would be unfair to whistleblowers to be deprived of an award simply because of “positive conduct” by the entities about which whistleblowers provided information. For these reasons, this commenter believed that permitting awards based on DPAs and NPAs would fairly balance the important goals of rewarding whistleblowers and encouraging companies to adopt effective compliance programs and to cooperate fully during investigations in the hope of obtaining a DPA or an NPA.

See

SIFMA Letter.

Several commenters advocated that we pay awards in other circumstances beyond the DPAs, NPAs, and settlement agreements addressed in the proposed rule. One commenter urged that awards should be available in cases where, even if the Commission does not bring a covered action, the whistleblower's tip led DOJ to take action (including cases where DOJ issues a declination letter).

Another commenter stated that we should pay awards in cases where we refer a whistleblower complaint to a self-regulatory organization that subsequently takes enforcement action relating to the complaint.

One commenter asserted that an award should be available, irrespective of the mechanism by which a matter is resolved, any time a whistleblower's information assists the Commission or other governmental entities in obtaining money.

Another commenter opined that “any monetary payment to the SEC by an entity accused of wrongdoing, after and because of the commencement of an SEC inquiry, could be fairly classified as the result of an administrative action, even if the matter does not proceed to be heard by an administrative judge.”

Another commenter suggested that we pay awards in cases with less than $1 million in monetary sanctions.

See

Sivere Letters dated Aug. 14 and 10, 2018.

See

letter from Anonymous-46 (Sept. 9, 2018).

See

TAF Letter.

See

Think Computer Letter.

See

Anonymous-88 Letter.

Two commenters did not support the proposal to pay whistleblower awards on the basis of DPAs and NPAs entered into by criminal authorities and Commission settlement agreements outside of the context of a judicial or administrative proceeding.

One of these commenters stated that these types of agreements are not always filed in court or subject to judicial oversight, which is an important “check and balance” on the process.

This commenter further stated that the Commission does not have any particular expertise in the myriad state laws that may come into play with respect to a settlement with a particular state attorney general, and that the standards of culpability under state law may differ considerably from those under the federal securities laws. This commenter thus urged that paying whistleblower awards on the basis of state DPAs and NPAs would lead to “inconsistency in the eligibility standards under the Commission's rules, and could create an imbalance among the states.”

See

letter from U.S. Chamber of Commerce Center for Capital Markets Competitiveness (Sept. 18, 2018) (“CCMC Letter”); letter from Carrie Devorah (July 30, 2018) (“Devorah Letter”).

See

CCMC Letter.

This same commenter also stated that interpreting the term “administrative action” to include DPAs, NPAs, and Commission settlement agreements outside of the context of a judicial or administrative proceeding would be contrary to the plain meaning of the term “action,” inconsistent with current usage of the term and judicial precedent, and would lack any basis in the Dodd-Frank Act itself. Instead, this commenter asserted, DPAs, NPAs, and Commission settlement agreements encompassed by the proposed rule are not “actions” because they are contracts among regulators and third parties, are entered into voluntarily by those third parties, and cannot be unilaterally implemented by any individual regulator.

3. Final Rule

After considering the comments, we have decided to adopt Rule 21F-4(d)(3) with three changes.

First,

we have decided not to extend the rule to DPAs and NPAs entered into by state attorneys general in criminal cases.

Second,

we have added the modifier “similar” in paragraph (d)(3)(ii), which describes the Commission settlement agreements to which the rule will apply, in order to clarify the features of these agreements that merit treating them as administrative actions that impose monetary sanctions.

Third,

we have decided to apply the rule to any DPA, NPA, or Commission settlement agreement that would otherwise fall within the terms of the rule (provided that the agreement was entered into after July 21, 2010, which is the date after which the Dodd-Frank Wall Street Reform and Consumer Protection Act took effect).

We have effectuated this change by revising the language in Rule 21F-10(b) and Rule 21F-11(b). Specifically, we have added language to those rules so that the effective date of the amended rules will serve as the trigger date that begins a 90-day period for a whistleblower to submit an application for a DPA, NPA, or Commission settlement agreement entered after July 21, 2010 but prior to the effective date of the amended rules (although any award application that as of the effective date of these rule amendments is already pending for an DPA, NPA, or Commission settlement agreement covered by this rule need not be resubmitted). We believe that applying the revised definition of “action” to these prior DPAs, NPAs, and Commission settlement agreements is consistent with the purposes of the program to compensate meritorious whistleblowers when their information also leads the authorities identified in the statute to successfully resolve a related matter while, at the same time, not creating an undue additional burden on the Office of the Whistleblower in processing what we anticipate should be a relatively small number of applications.

For the reasons described in the Proposing Release, we disagree with the

commenter who asserted that we lack authority to interpret the term “administrative action” to also encompass DPAs and NPAs entered into by DOJ and settlement agreements entered into by the Commission outside of the context of a judicial or administrative proceeding. Rather, we conclude that the term “administrative action” is sufficiently broad to encompass these alternative vehicles for resolving investigations into violations of law. In particular, as noted previously, Congress's use of the term “administrative action”—rather than administrative

proceeding

—does not limit award consideration to cases where investigations are resolved through formal adjudicatory administrative proceedings, and our rulemaking authority under Section 21F and other provisions of the Exchange Act therefore permits us to bring the agreements described in the proposed rule within the definition of an “administrative action.”

Section 21F(j) of the Exchange Act, 15 U.S.C. 78u-6(j), grants us “the authority to issue such rules and regulations as may be necessary or appropriate to implement” the whistleblower award program. Similarly, Section 23(a)(1) of the Exchange Act, 15 U.S.C. 78w(a)(1), expressly provides the Commission the “power to make such rules and regulations as may be necessary or appropriate to implement the provisions” of the Exchange Act. In addition, we have broad definitional authority pursuant to Section 3(b) of the Exchange Act, 15 U.S.C. 78c(b), which provides us with the “power by rules and regulations to define . . . terms used in [the Exchange Act].”

Several circumstances inform our decision to treat DPAs and NPAs entered into by DOJ as forms of “administrative action” for purposes of Section 21F.

First,

DOJ itself recognizes the importance of DPAs and NPAs in the hierarchy of tools that are available for addressing criminal misconduct on the part of companies, their officers, and their employees.

DOJ has explained that DPAs and NPAs provide a “middle ground” for resolution of a criminal matter in circumstances where a declination is determined to be inappropriate, but a conviction of a company may have significant collateral consequences for innocent third parties.

Second,

DPAs and NPAs entered into by DOJ ordinarily impose significant continuing obligations and conditions on subject companies, coupled with clear and substantial consequences for default—including the continuation or initiation of criminal prosecution.

Thus, on its face, the terms of a DPA or an NPA reflect a substantive resolution of a criminal matter by DOJ—in other words, an

action

—and not simply the closing of the investigation.

We note that, because criminal charges are filed in connection with a DPA (and later dismissed if all the terms of the agreement are satisfied), a DPA in our view also satisfies the alternative requirement of being a “judicial action.”

See

US Dep't of Justice, Justice Manual, § 9-28.200, 9-28.1100 (2018) (

available at https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.200

) (“Justice Manual”);

see also

Memorandum from Brian A. Benczkowski, Assistant Attorney General, re: Selection of Monitors in Criminal Division Matters (Oct. 11, 2018) (

available at https://www.justice.gov/criminal-fraud/file/1100366/download

) (describing DPAs, NPAs, and plea agreements as forms of corporate criminal resolution).

See

Justice Manual § 9-28.1100.

For example, DPAs and NPAs entered by DOJ have stated terms (usually two to three years). At the end of the term, if the company has fulfilled all of its obligations—including making any required monetary payments—the government will typically dismiss the charges (in connection with DPAs) or not file charges (in the case of an NPA). Typically, in both DPAs and NPAs the company is required to admit responsibility for the conduct of its officers and employees and to admit to a detailed statement of facts that supports the government's case. The company is also typically required during the term of the agreement to self-report any new evidence of violations. The government, acting in its sole discretion, determines whether the company has fulfilled all of its obligations under the agreement. If the company fails to do so, then the government may proceed with the prosecution (in the case of a DPA) or file charges against the company (in the case of an NPA). Applicable statutes of limitation are typically tolled during the term of the agreement, and the statement of facts to which the company admitted is admissible into evidence in any prosecution resulting from failure to comply with the agreement.

For similar reasons, it is reasonable to view payments made under DOJ DPAs and NPAs as “monetary sanctions” on which a whistleblower award can be based. Section 21F(a)(4) defines “monetary sanctions,” in relevant part, as “monies, including penalties, disgorgement, and interest, ordered to be paid . . . as a result of such action or any settlement of such action.”

The payments required under a DPA or an NPA with DOJ are enforceable as a result of the company's admissions of facts and liability, which would support the government's criminal charges, coupled with the company's agreement to toll applicable statutes of limitations in the event DOJ determines (in its sole discretion) that prosecution is warranted because the company has breached the agreement. Given these provisions, the practical effect of a DPA or an NPA is to compel the subject company to make the monetary payments to which it has agreed or face the possibility of criminal prosecution on the basis of its previous admissions. Under these circumstances, payments made under a DPA or an NPA with DOJ are reasonably viewed as “ordered” within the meaning of Section 21F.

15 U.S.C. 78u-6(a)(4), 78u-6 (b)(1).

15 U.S.C. 78u-6(a)(4);

see Order,

Black's Law Dictionary (10th ed. 2014) (defining an “Order” as “A command, direction, or instruction”); U.S. Gov't Accountability Off., GAO-10-110, DOJ Has Taken Steps to Better Track Its Use of Deferred and Non-Prosecution Agreements, but Should Evaluate Effectiveness 11 (2009) (characterizing payments under DPAs and NPAs as “monetary penalties imposed by DOJ . . . .”). We have also carefully considered whether to include declination letters within the ambit of Rule 21F-4(d)(3), and we have determined not to do so. We recognize that, in some instances, recent declination letters recite considerations similar in certain respects to provisions found in DPAs and NPAs, such as a company's agreement to cooperate, make monetary payments, and undertake remedial measures.

See, e.g.,

Justice Manual § 9-47.120 (2018) (

available at https://www.justice.gov/jm/jm-9-47000-foreign-corrupt-practices-act-1977

) (FCPA Corporate Enforcement Policy). However, declination letters as a class do not appear to reflect many of the key attributes of DPAs and NPAs described above (

e.g.,

admissions and tolling of applicable statutes of limitations) that have been important to our decision to make whistleblower awards available for DPAs and NPAs.

In the implementation of our whistleblower program to date we have not had occasion to consider a DPA or an NPA entered into by a state attorney general in a criminal case. We proposed to include such agreements in Rule 21F-4(d)(3)(i) in the expectation that they should generally be similar in nature to DPAs and NPAs entered into by DOJ. However, we are persuaded by the concern expressed by one commenter that including state DPAs and NPAs in the rule risks introducing inconsistency in the eligibility standards for related action awards as a result of the application of varying culpability and other standards under state law.

DPAs and NPAs are long-established in DOJ practice, and their terms, conditions, and use have been subject to a great deal of transparency.

But the Commission has limited insight into the practices of 50 state attorneys general (plus the District of Columbia's) in entering into DPAs and NPAs, and we believe it would be administratively infeasible to establish consistent award standards if required, on a case-by-case basis, to determine whether any particular state DPA or NPA includes terms sufficiently similar to those that typify DOJ DPAs and NPAs such that the state instrument should also be deemed an “administrative action” that imposes “monetary sanctions.” For this reason, new Rule 21F-4(d)(3) does not extend to DPAs or NPAs entered into by state attorneys general in criminal cases.

See

CCMC Letter.

See

notes 28 to 30,

supra.

The rule we are adopting today includes settlement agreements similar to DOJ DPAs and NPAs entered into by the Commission outside of the context of a judicial or administrative proceeding. In our practice, these agreements have included key provisions typically analogous to those

found in DOJ DPAs and NPAs that warrant also treating them as “administrative actions,” with the payments required under these agreements constituting “monetary sanctions.” Among the provisions that we deem important to our analysis are: (1) Substantial continuing obligations on the part of the respondent (

e.g.,

detailed and specific cooperation requirements and a requirement that any successors to the respondent be bound by the agreement); (2) specificity as to conduct that constitutes a violation of the agreement (

e.g.,

further violations of the federal securities laws, provision of false information, and failure to make payments on the schedule and in the amounts due); (3) tolling of applicable statutes of limitations; and (4) clear and substantial consequences for default, including the respondent's agreement not to contest or challenge the admissibility in a future enforcement action of factual statements supporting the Commission's case that are recited as part of the agreement, as well as the respondent's consent to the use of any documents, testimony, or other evidence previously provided by it in a future enforcement action resulting from its violations.

However, extending awards to the other circumstances suggested by some of the commenters would exceed our statutory authority. As Section 21F defines a “covered judicial or administrative action” to require “monetary sanctions exceeding $1 million,”

we are unable to pay awards in Commission actions where we obtain any smaller amount of monetary sanctions. For similar reasons, the suggestion of some commenters that an award be available any time a whistleblower's information helps secure a payment of money to the Commission sweeps too broadly; our ability to pay a whistleblower award turns in each case on whether a payment can reasonably be viewed as a “monetary sanction,” defined in relevant part as “monies, including penalties, disgorgement, and interest, ordered to be paid . . . as a result of such action or any settlement of such action.”

In addition, because a “related action” is defined in the statute to require that the same original information provided by the whistleblower also led to the successful enforcement of the Commission action,

we cannot grant an award for an action by DOJ or a self-regulatory organization absent a predicate Commission covered action as to which the whistleblower also merits an award.

15 U.S.C. 78u-6(a)(1).

15 U.S.C. 78u-6(a)(4), 78u-6 (b)(1). As the Proposing Release explained, in our view, a payment of money is reasonably treated as “ordered” when the governmental entity has some mechanism to compel the payment either directly or indirectly. This could include, but does not necessarily require, the ability to obtain a court order requiring the payment. As is further discussed above, the requisite indicia of compulsion are present in the agreements described in proposed Rule 21F-4(d)(3) because of the significant consequences that may result from a breach of the payment obligation under the agreement.

15 U.S.C. 78u-6(a)(5).

See

In the Matter of the Claim for an Award in Connection with a Notice of Covered Action, Exchange Act Release No. 34-84506, 2018 WL 5619386 n.5 (Oct, 30, 2018) (“The Commission may make an award to a whistleblower in connection with a related action

only if

the Commission has determined that the whistleblower is entitled to an award for a Commission covered action.”) (emphasis in original). As with other related actions, we do not believe it is necessary to require the Office of the Whistleblower to post notices of DPAs or NPAs entered into by DOJ. In the great majority of cases, claimants should be able to learn about DPAs and NPAs through public announcements. Some claimants also may know of a DPA or NPA as a result of having communicated with the authority bringing the action. In the rare instance where a claimant can demonstrate that compliance with Rule 21F-11(b) was not practicable because a DPA or an NPA was non-public and the claimant did not obtain actual knowledge of the agreement prior to the deadline for filing an award claim, the Commission could consider exercising its authority to waive compliance with the rule.

See

Section 36(a) of the Exchange Act, 15 U.S.C. 78mm(a), and Rule 21F-8(a). Commission settlement agreements subject to the rule are publicly announced on our website.

B. Rule 21F-4(e)—Definition of “monetary sanctions”

1. Proposed Rule

Rule 21F-4(e) currently defines the term “monetary sanctions” to mean “any money, including penalties, disgorgement, and interest, ordered to be paid and any money deposited into a disgorgement fund or other fund pursuant to Section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)) as a result of a Commission action or a related action.” This definition substantially tracks the definition set forth in Section 21F of the Exchange Act.

The Commission proposed to amend Rule 21F-4(e) to provide that the term “monetary sanctions” means: (1) A required payment that results from a Commission action or related action and which is either (i) expressly designated by the Commission in an administrative proceeding or a court of competent jurisdiction in a judicial proceeding as disgorgement, a penalty, or interest thereon, or (ii) otherwise required as relief for the violations that are the subject of the covered action or related action; or (2) any money deposited into a disgorgement fund or other fund pursuant to Section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such action or any settlement of such action.

According to section 21F(a)(4), the term “monetary sanctions,” when used with respect to any judicial or administrative action, means any monies, including penalties, disgorgement, and interest, ordered to be paid; and any monies deposited into a disgorgement fund or other fund pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such action or any settlement of such action. 15 U.S.C. 78u-6(a)(4).

Paragraph (e)(1)(ii) of the proposed amended rule was intended to clarify—consistent with our existing practice—that a required payment not expressly designated as disgorgement, penalty, or interest, must be in the nature of relief for the violations charged in order to be considered a “monetary sanction” for purposes of the whistleblower award program. Thus, we explained, if, for example, a court orders an asset freeze and appoints a receiver in a Commission enforcement action, and, without separately entering a disgorgement order, the court subsequently issues an order approving the receiver's plan to distribute money to injured investors, the amended rule would treat that second order as a monetary sanction under paragraph (e)(1)(ii) of the proposed rule. However, if the receiver requests approval to use frozen funds to pay creditors, taxes to a governmental entity, attorney's fees, or other costs of the receivership, such payments would not constitute monetary sanctions under paragraph (e)(1)(ii) because they are not in the nature of relief for the violations charged.

2. Comments Received

Some commenters supported the proposed amendment to the definition of “monetary sanctions.”

However, one of these commenters expressed concern that if the Commission were to obtain a court order for defendants to pay “$1 million in restitution payments and $1 million in punitive damages,” the order for punitive damages might not be viewed “as relief” for the securities violations.

This commenter recommended use of “broader terminology, without substantially changing the way [the Commission] calculates qualifying payments from the way it does now.”

See

CCMC Letter; Think Computer Letter; letter from Anonymous-135 (Oct. 22, 2019).

See

Think Computer Letter.

Several other commenters objected to the proposed amendment.

Some

commenters argued that the proposed changes would introduce ambiguity or confusion into the rule.

In particular, one of these commenters observed that our use of the word “required” in the proposed rule would lead to “confusion and uncertainty” and suggested that we revert to the statutory term “ordered.”

See

TAF Letter; letter from Whistleblower Law Collaborative, LLC (Sept. 18, 2018) (“Whistleblower

Law Collaborative Letter”); Markopolos Letter; letter from Anonymous-12 (Sept. 18, 2018) (“Anonymous-12 Letter”); and letter from Mac Vineyard (Sept. 29, 2018) (“Vineyard Letter”).

See

TAF Letter; Whistleblower Law Collaborative Letter; Markopolos Letter.

See

Whistleblower Law Collaborative Letter.

The principal concern of objectors appeared to be that the definition of “monetary sanctions” should be flexible enough to support whistleblower awards in a variety of circumstances that did not appear to be covered by the proposed amendment. For example, several commenters urged that the definition of “monetary sanctions” should permit payments to a whistleblower based on recoveries by a bankruptcy trustee to the same degree as a receiver appointed in a Commission enforcement action.

One of these commenters asserted: “While Ponzi cases often go into receivership, public company accounting frauds . . . often end up in federal bankruptcy court. It is important for corporate whistleblowers to know they will be rewarded for turning in their company even if exposing the fraud ends up bankrupting the company.”

Another of these commenters similarly supported awards in connection with bankruptcy proceedings, making the point that “[t]he primary purpose of the two proceedings is essentially the same: To place control of the company in the hands of a disinterested party in order to properly run, reorganize or liquidate the business and protect investors and creditors.”

See

TAF Letter; Whistleblower Law Collaborative Letter; Markopolos Letter; Anonymous-12 Letter.

See

Markopolos Letter.

See

TAF Letter.

In addition to including bankruptcy cases, one commenter argued that the definition of “monetary sanctions” should be broad enough to permit awards in other forms of proceedings “where sanctions or settlements result because of the Commission's work and/or the whistleblower's tip . . . .”

This commenter urged that “the definition of `monetary sanctions' should be sufficiently flexible . . . to allow the Commission to consider sanctions obtained in any proceeding which results from the Commission's action (or a `related action'), where there is a strong nexus (

e.g.,

a common nucleus of operating facts) between the matter in question and the whistleblower's tip and the ensuing investigation, and results in monetary relief for injured parties such as investors. In other words, the Commission's definition of `monetary sanction' should be sufficiently flexible to accurately reflect what the whistleblower's tip accomplished in the form of relief to defrauded investors.”

See

Whistleblower Law Collaborative Letter.

Id.

This same commenter also asserted that there are many cases where the cost of recovery and administration of claims “cannibalizes” a substantial portion of the funds available for distribution to injured investors.

The commenter gave as an example a $100 million fraud case where a receiver successfully recovers $10 million but bills $7.5 million in professional expenses and fees. In such a case, the commenter opined, it would seem unduly harsh to calculate the award on $2.5 million; an award should be based on the gross amount recovered, and not reduced because of “billings from attorneys, accountants, or other professionals.”

Id.

3. Final Rule

After considering the comments, we have decided to adopt Rule 21F-4(e) substantially as proposed. However, in response to concerns raised by some commenters about potential confusion, and to more closely track the statutory language, we have determined to use the word “ordered,” rather than “required,” so that Rule 21F-4(e) as adopted, in relevant part, now reads, “(e)

Monetary sanctions

means: (1) An order to pay money that results from a Commission action or related action and which is either: (i) Expressly designated as penalty, disgorgement, or interest; or (ii) Otherwise ordered as relief for the violations that are the subject of the covered action or related action . . . .”

The proposed rule substituted the term “required” to reflect the recognition in proposed Rule 21F-4(d)(3) that monetary obligations under DPAs, NPAs, and Commission settlement agreements outside of the context of a judicial or administrative proceeding are not reflected in formal adjudicative orders. However, we have now included in the discussion of Rule 21F-4(d)(3), as adopted, additional explanation of these agreements and why the payments under them are reasonably viewed as “ordered” for purposes of the definition of monetary sanctions, rendering it unnecessary to substitute “required” for “ordered” in Rule 21F-4(e). We have also revised paragraph (e)(1)(i) to refer to “a penalty, disgorgement, or interest” rather than “disgorgement, a penalty, or interest thereon,” as was used in the proposed rule, in order to more closely track the statutory language and eliminate any potential confusion regarding this phraseology.

With respect to comments relating to bankruptcy proceedings, our statutory authority does not extend to paying whistleblower awards for recoveries in bankruptcy proceedings or other proceedings that may in some way “result from” the Commission's enforcement action and the activities of the whistleblower. Under Section 21F, we are authorized to pay whistleblower awards only on the basis of monetary sanctions that are imposed “in” a covered judicial or administrative action or related action.

A “covered judicial or administrative action” is an action “brought by the Commission under the securities laws that results in monetary sanctions exceeding $1 million,”

while a “related action” must be brought by one of the enforcement and regulatory authorities specified in the statute.

Bankruptcy proceedings are not brought by either the Commission acting under the securities laws or by one of the designated related-action authorities, and orders to pay money that result from bankruptcy proceedings are not imposed “in” Commission covered actions or related actions. The same is true of monetary payments that may result from other forms of proceedings that are not Commission covered actions or related actions.

15 U.S.C. 78u-6(b)(1)(A) through (B).

15 U.S.C. 78u-6(a)(1).

15 U.S.C. 78u-6(a)(5). These authorities are the Attorney General of the United States, an appropriate regulatory authority (a term which is further defined in Exchange Act Rule 21F-4(g)), a self-regulatory organization, or a State Attorney General in connection with a criminal investigation. 15 U.S.C. 78u-6(h)(2)(D)(i).

With respect to the commenter who sought to ensure that punitive damages would be covered by the rule, we note that punitive damages are not obtainable in Commission covered actions. However, the Commission may order (in an administrative proceeding) or seek (in a federal court action) civil money penalties, which are covered by the statute and the rule and therefore are a basis for posting a Notice of Covered Action and paying a whistleblower award.

Defining “monetary sanctions” to include payments that are ordered “as relief for the violations that are the subject of the . . . action” is most consistent with our statutory authority. As noted, Section 21F(a)(4) of the Exchange Act defines “monetary sanctions,” in relevant part, as “any monies, including penalties, disgorgement, and interest, ordered to be paid; . . . as a result of [any judicial or administrative] action or the settlement of such action.”

Under accepted principles of statutory construction, the words that follow “including”—penalties, disgorgement, and interest—although not an exhaustive list, are illustrative of the

general principle to be applied.

Accordingly, as the D.C. Circuit has held, we think it is reasonable to “expand on the remedies explicitly included in the statute only with remedies similar in nature to those enumerated.”

Because “penalties, disgorgement, and interest” describe forms of monetary relief for the violations that are the subject of an action, this provision reflects a congressional expectation that we would pay whistleblower awards only with respect to other orders to pay money that also constitute relief for the violations. For example, although restitution is not one of the sanctions set forth after the word “including,” restitution ordered in a criminal proceeding is a form of relief for the violations that are the subject of the action, and therefore is a “monetary sanction” that will support a related-action whistleblower award.

15 U.S.C. 78u-6(a)(4).

See Samantar

Yousuf,

560 U.S. 305, 317 (2010);

United States

Philip Morris USA, Inc.,

396 F.3d 1190, 1200 (D.C. Cir. 2004).

United States

Philip Morris USA, Inc.,

396 F.3d at 1200.

For these reasons, we are not persuaded by the commenter who urged that we define “monetary sanctions” to include a court's orders to pay a receiver's fees or billings from attorneys, accountants, or other professionals. Treating a court order to pay such fees as a “monetary sanction” would not comport with the statutory language (as just discussed).

As more fully discussed in the Proposing Release, we also view the requirement in Section 21F(a)(1), 15 U.S.C. 78u-6(a)(1), that a Commission action must “

result

[ ]

monetary sanctions exceeding $1,000,000” (emphasis added), and the requirement in Section 21F(a)(4), 15 U.S.C. 78u-6(a)(4), that a monetary sanction must be a “result of” an action, as supporting our interpretation. The phrase “results in” suggests to us that Congress was addressing those monetary obligations that the action secures “as relief” for the violations that are the subject of the action.

Additionally, as the Proposing Release stated, this conclusion is buttressed by Congress's use of the phrase “monetary sanctions

imposed in

the action” in further describing the sanctions that would support a whistleblower award.

While in normal parlance a person might say that disgorgement or civil penalties were “imposed” as a result of a securities-law violation, we do not believe that one would typically say that a court order approving fees and expenses of a court-appointed receiver or other professionals hired by the receiver “impos[ed]” a monetary sanction. Rather, this language indicates that the congressional focus was on monetary obligations that are in the nature of relief for the violations that are the subject of the action.

15 U.S.C. 78u-6(b)(1)(A) through (B) (emphasis added).

Finally, the Proposing Release stated generally that a court order approving a receiver's plan to distribute money to injured investors would be treated as a monetary sanction. We further clarify here, in line with Commission practice, the types of distributions to injured investors that will be treated as monetary sanctions. Although the Commission may seek the appointment of a receiver in an enforcement action filed in federal court, a receiver does not work for the Commission, represent the interests of the Commission, or even represent the interests of investors. Rather, a receiver is an officer of the court, appointed by the court to take custody of assets over which the court asserts jurisdiction (the receivership estate), for the benefit of all persons whom the court may later adjudge to have rights in the property.

Depending on the violations charged and the attendant facts and circumstances of the case, a court order directing a receiver appointed in a Commission enforcement action to make a distribution to investors may reflect recompense to the investors of money lost as a result of the securities violations, or it instead may simply reflect a return of assets that the receiver has obtained in his custodial capacity, which is greater than the amount of money lost as a result of the violations.

See Atlantic Trust Co.

Chapman,

208 U.S. 360, 370-71 (1908). Indeed, viewing a court order to pay a receiver's fees as a “monetary sanction” cannot be squared with the legal status of a receiver as an officer of the court and the receiver's fees as costs incurred by the court in administering the receivership property. Ralph Ewing Clark, A Treatise on the Law and Practice of Receivers §§ 11, 637 (3d ed. 1992).

For example, in a simple hypothetical case where an investment adviser is charged with violating the securities laws for misappropriating $1 million from a fund that holds $100 million, investors lost $1 million as a result of the violations. If, for some reason, a receiver were appointed in the case and the receiver were ordered to unwind the funds and return all fund assets to the investors, any amounts paid in excess of the $1 million lost as a result of the violations would be a return of custodial assets held by the receiver, and not relief for the violations.

Under Rule 21F-4(e) as amended, we first look to whether an order to pay money is expressly designated as penalty, disgorgement, or interest. If so, then that order establishes the amount of monetary sanctions in the case as to that defendant. Absent an order to pay money expressly designated as a penalty, disgorgement, or interest, we will consider whether an order to pay money to investors is in the nature of relief for the violations that were the subject of the action. In the context of a Commission covered action where a receiver is appointed and the court orders a distribution of money in the receivership estate to investors, we will begin our assessment of the amount of the applicable monetary sanctions with an amount that does not exceed the higher of (i) the ill-gotten gains received by the defendants over which the receiver has been appointed, or (ii) investors' losses as a result of the violations. In determining the investor losses, we will consider losses that flowed from the violative conduct alleged in the covered action, to the extent such losses approximate the monetary sanctions the Commission could obtain in the covered action. In addition, we will not treat as a “monetary sanction” amounts that merely reflect a return of custodial assets to investors and not relief for the violations.

Under Section 21F(b)(1), the Award Amount must be between 10 percent and 30 percent “of what has been collected” of the monetary sanctions imposed in a Commission covered action or a related action. When, pursuant to the analysis above, a receiver's distribution to investors is the basis for the amount of a monetary sanction under paragraph (e)(1)(ii) of Rule 21F-4, that amount is deemed “collected” at the time the court orders the distribution. However, in a case involving a receiver in which the court has ordered penalties, disgorgement, or interest under paragraph (e)(1)(i), as noted above, that order—not the amounts distributed by the receiver—establishes the amount of the monetary sanction as to that defendant. In this circumstance, payment of an award based on the amount “collected” turns on the Commission's ability to conclude that some portion of funds or other assets over which the receiver assumes control should be treated as satisfying the court's monetary judgment in favor of the Commission. In applying this principle we have and will continue to generally expect—absent particular facts and circumstances supporting a different approach—to look to the amount distributed to investors as the amount collected for award purposes. If the amount distributed to investors includes monies paid to the receiver by other defendants to satisfy their own respective monetary orders, then we would generally expect to net these monies. For example, if two defendants are each separately ordered to pay disgorgement of $1 million, each contribute $500,000 to the receivership estate, and the receiver distributes $1 million to investors, then only $500,000 is “collected” as to each defendant's disgorgement order.

C. Amendments to Exchange Act Rule 21F-3(b) Defining “related action”

1. Proposed Amendments

Under Exchange Act Section 21F(b), any whistleblower who obtains an award based on a Commission enforcement action may be eligible for an award based on monetary sanctions

that are collected in a related action. Exchange Act Rule 21F-3(b) implements this statutory directive.

Rule 21F-3(b)(1) defines “related action.” The Commission proposed to amend the existing definition to clarify that a whistleblower would qualify for a potential related-action award if either (i) the whistleblower provided to the other governmental entity that pursued the purported related action the same information that the whistleblower provided to the Commission and the provision of that information led to the successful enforcement of the Commission covered action or (ii) the Commission itself provided that information to the other governmental entity and the provision of that information led to the successful enforcement of the related action.

We also indicated that we are making a technical modification to the definition in Rule 21F-3(b)(1) to conform the existing rule language with the statutory definition as provided in Section 21F(a)(6) of the Exchange Act. This technical amendment clarifies that with respect to any related action the action must be “based on” the same original information that the whistleblower voluntarily provided to the Commission and that “led to the Commission to obtain monetary sanctions totaling more than $1,000,000.” As currently drafted, the rule reads as though this requirement applies only to criminal actions brought by a state attorney general.

Additionally, the Commission proposed a new paragraph (4) to Rule 21F-3(b) that would apply to situations where the Commission's whistleblower program and one or more separate whistleblower award programs might potentially apply to the same action. The proposed new paragraph (4)—the “multiple-recovery rule”—is based on the Commission's experience and past practice and is intended to clarify various issues relating to the application of the Commission's whistleblower program when another award program would potentially apply to the same action. It would provide that, notwithstanding the definition of related action in Rule 21F-3(b)(1), “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, the Commission will deem the action a related action only if the Commission finds (based on the unique facts and circumstances of the action) that its whistleblower program has the more direct or relevant connection to the action.” Proposed paragraph (4) would also provide that even “[i]f the Commission does determine to deem the action a related action, the Commission will not make an award to you for the related action if you have already been granted an award by the governmental entity responsible for administering the other whistleblower award program. Further, if you were denied an award by the other award program, you will not be permitted to readjudicate any issues before the Commission that the governmental entity responsible for administering the other whistleblower award program resolved against you as part of the award denial.” Lastly, proposed paragraph (4) provided that, if the Commission makes an award before an award determination is finalized by the governmental entity responsible for administering the other award program, the Commission would condition its award on the meritorious whistleblower making a prompt, irrevocable waiver of any claim to an award from the other award program.

Beyond these proposed amendments, the Commission also stated that as part of this rulemaking it is considering whether to repeal Exchange Act Rule 21F-3(b)(3)—which provides a somewhat different mechanism to determine that recovery from the Commission is not available where the whistleblower program administered by the Commodity Futures Trading Commission (CFTC) is involved—so that the provisions of proposed paragraph (4) would apply to all instances where a potential multiple recovery might occur.

2. Comments Received

With respect to the proposed revision of paragraph (1) of Rule 21F-3(b), the Commission received two comments.

One of the comment letters opposed the proposal and the other raised concerns.

See

letters from Kohn, Kohn & Colapinto, LLP (July 24, 2018) (“Kohn, Kohn & Colapinto July 24 Letter”) and Sen. Charles E. Grassley (Sept. 18, 2018) (“Sen. Grassley Letter”).

Neither of these comments expressed any concern with the technical revision to conform paragraph (1) to the statutory definition of related action in Section 21F(a) of the Exchange Act.

Both commenters expressed the view that the Commission cannot require whistleblowers to provide directly any information to any federal or state agency (or other governmental entity that can bring a related action) that does not have rules protecting whistleblower confidentiality and allowing anonymous whistleblower submissions. The commenter who opposed the proposed change also asserted that the confidentiality concern is not ameliorated by the alternative that allows the Commission to share the whistleblower's information directly with the other governmental entity because the whistleblower may never be informed that the information has been provided.

Finally, the opposing commenter asserted that the revised language in proposed paragraph (1) would not cover situations where one sister agency (

e.g.,

DOJ) provided a whistleblower's information to another sister agency (

e.g.,

the Federal Deposit Insurance Corporation), but neither the Commission nor the whistleblower had directly provided the information to the second sister agency.

See

Kohn, Kohn & Colapinto July 24 Letter.

Id.

With respect to the proposed multiple-recovery rule, two commenters supported the proposal. One commenter stated that the proposal would improve the Commission's stewardship of the disbursement of public funds,

while another agreed with the Commission's preliminary view that a whistleblower should neither have multiple recoveries on the same action nor multiple bites at the adjudicatory apple.

One commenter recommended that the Commission go further by categorically excluding from the related-action definition any judicial or administrative action that may be subject to an alternative award program.

See

CCMC Letter.

See

Center for Workplace Compliance Letter.

See

CCMC Letter.

Several commenters opposed the proposed multiple-recovery rule. The principal concerns raised were that: (i) The proposed amendment would increase the uncertainty and delay concerning any potential award and that this might discourage a whistleblower from coming forward;

(ii) the proposal is unnecessary because the Commission has never encountered a situation where a second whistleblower program potentially applied;

(iii) the proposal places an unreasonable burden on potential whistleblowers and could undermine the confidentiality protections in Section 21F(h)(2) by forcing whistleblowers to submit their information to other entities that may have a competing whistleblower program;

(iv) the Commission should not read Section 21F's language to impose a cross-agency cumulative 30 percent award ceiling;

and (v) the proposal ignores the fact that other whistleblower programs may have different award criteria and eligibility

considerations, including significantly reduced payout potentials.

See

TAF Letter; Cornell Securities Law Clinic (Sept. 17, 2018) (“Cornell Law Clinic Letter”); Anonymous-9 (Sept. 18, 2018) (“Anonymous-9 Letter”); Think Computer Letter; AFREF Letter.

See

TAF Letter.

See

Sen. Grassley Letter; Anonymous-9 Letter.

See

AFREF Letter; Think Computer Letter.

See

Anonymous-9 Letter.

Some commenters offered alternatives to the proposed multiple-recovery rule. One alternative would be to allow a whistleblower to decide whether to receive an award from the Commission's whistleblower award program or the other award program after the whistleblower has been informed by both programs about their respective award determinations.

A second alternative would authorize a Commission award on an action as a supplement to the award authorized by the other whistleblower program up to an aggregate maximum based on the application of the statutory maximum percentage under the Commission's program (

i.e.,

30 percent) to a combination of the multiple recoveries.

See

AFREF Letter; Think Computer Letter.

See

AFREF Letter.

Finally, two commenters supported the existing paragraph (3) of Rule 21F-3(b) and its framework for preventing multiple-recoveries or issue re-adjudication where both the Commission's and the CFTC's whistleblower programs might apply. In supporting the framework of paragraph (3), one of the commenters observed that the SEC and the CFTC regulate very similar and at times overlapping markets and the commenter believed that this counseled for retention of the existing paragraph (3).

Another commenter suggested that the existing framework of paragraph (3) should actually be expanded to cover all situations where the Commission might encounter a potentially applicable alternative whistleblower program that relates to another governmental entity's action.

See

Think Computer Letter.

See

Anonymous-9 Letter.

3. Final Rule

After reviewing the comments, we are (i) adopting revised paragraph (1) of Rule 21F-3(b) as proposed with one further clarification; (ii) removing existing paragraph (3) concerning potential multiple recovery under the SEC and CFTC whistleblower programs for the same action; and (iii) adopting proposed paragraph (4) as new paragraph (3) of Rule 21F-3(b).

We are making one further clarifying change. The proposed rule text stated that in assessing whether an action brought by another entity qualifies as a related action under the Commission's whistleblower program, the Commission will consider the “unique facts and circumstances” of the case. We are concerned that the use of the word “unique” may suggest that something highly unusual or special about the case will be relevant to the analysis, but that was not the intention of the proposal. Accordingly, to clarify that each case will be assessed on its own particular facts and circumstances, the final rule text does not include the word “unique.”

Revised paragraph (1) of Rule 21F-3(b) provides that a related action is: (i) A judicial or administrative action yielding monetary sanctions; (ii) that is brought by one of the entities listed in Rule 21F-3(b)(1)(i)-(iv); and (iii) that is based upon information that either the whistleblower provided directly to the governmental entity or the Commission itself passed along to the other governmental entity pursuant to the Commission's procedures for sharing information, and which is the same original information that the whistleblower voluntarily provided to the Commission and that led the Commission to obtain monetary sanctions totaling more than $1 million.

The modification that we are making to the proposed rule text would include a clarification that a related action must yield monetary sanctions because the statute requires that any Award Amount must be tied directly to the monetary sanctions imposed.

Experience with the program has shown that other types of actions, including actions under antitrust law, are not likely to qualify as related actions where they do not have a clear, explicit, and direct connection to the conduct governed by the securities law.

15 U.S.C. 78u-6(b)(1).

For the reasons stated in the Proposing Release, it is appropriate that for an action to qualify as a potential related action a whistleblower must have submitted information directly to the governmental entity that brought the action, or the Commission must have provided the whistleblower's information directly to the governmental entity. This requirement is already provided for in Rule 21F-11(c), and it reflects our interpretation of the requirement in Section 21F(a)(5) of the Exchange Act that a related action must be “based upon the original information provided by a whistleblower” to the Commission. In addition, our experience with the whistleblower program to date leads us to conclude that these requirements regarding the provision of information are appropriate and beneficial to allow us to work with the governmental entity that has brought the purported related action to assess the role a whistleblower's information actually played in contributing to the success of the action. These two alternative requirements have allowed our staff to work with the other governmental entity in a way that is not unduly burdensome to our staff or the other governmental entity to reasonably trace the role of the information from the other governmental entity's receipt of it (including whether it was duplicative of information the other governmental entity already had and what role the information played in advancing the governmental entity's investigation) through to the success of the purported related action.

We acknowledge the commenters' concerns that a whistleblower may decline to provide information directly to a governmental entity that lacks any confidentiality or anonymity protections because of a potential heightened risk of disclosure. But thus far in our experience administering the program, we have routinely observed that many whistleblowers have been directly sharing information with entities that can bring potential related actions. That said, to the extent some subset of whistleblowers may have concerns about submitting their potential original information to one of these entities, they can take steps to remove any information that may disclose their identity before providing it to the other governmental entity and, when submitting their tip to that governmental entity, explain that information that may identify the whistleblower has been excluded but that it can potentially be obtained by the governmental entity from the Commission.

In this way, if the authority seeks and obtains information from the Commission that might reasonably disclose the whistleblower's identity, the other governmental entity will be subject to the same heightened confidentiality obligations that Section 21F(h)(2) imposes on the Commission.

If the whistleblower includes the Commission's TCR number in his or her submission to the other governmental entity, this should make it possible for the Commission to locate the information and provide it to the other governmental entity subject to the procedures and requirements for sharing such information. Further, if the other governmental entity for some reason is unwilling to accept an anonymous whistleblower tip submitted by an individual, the whistleblower could request, in writing, that the Commission staff provide the tip to the governmental entity and Commission staff will assess whether doing so would be appropriate given the nature of the tip, among other relevant considerations. Generally, before providing a whistleblower's tip to another governmental entity, the other authority must agree to maintain all whistleblower identifying information as confidential in accordance with the requirements established under Section 21F(h)(2)(A). In determining whether to provide information to another governmental entity or authority based on a whistleblower's request, we anticipate that the staff will consider the same mix of factors that the staff already looks to in deciding whether to share information.

See

15 U.S.C. 78u-6(h)(2)(D)(ii)(I) (directing that DOJ, various federal regulatory agencies, self-regulatory organizations, state attorney generals and

regulatory authorities, and the Public Company Accounting Oversight Board “shall maintain” any whistleblower identifying information provided to them from the Commission “as confidential in accordance with” the same heightened confidentiality obligations that Section 21F(h)(2)(A) of the Exchange Act imposes on the Commission).

While we appreciate that this may take additional effort by a whistleblower who is seeking to ensure that his or her information is received by the other governmental entity without losing the statutory confidentiality guarantees, we do not believe that this should impose an undue burden. Moreover, in the context of anonymous submissions made to the Commission, a whistleblower could similarly provide that same submission to one of the related-action entities even if the governmental entity does not expressly provide for anonymous disclosures. Under the Commission's rules, an anonymous whistleblower seeking to be eligible for an award must have an attorney, so the attorney should be well positioned to make the anonymous submission to the other governmental entity and to serve as the whistleblower's point of contact in dealing with that governmental entity.

We also determined not to revise the new rule to permit awards when another governmental entity that can pursue a potential related action shares information with a third governmental entity. In our view, the difficulties that could arise in trying to accurately and consistently assess the award criteria as a result of such an indirect chain of information transfer could pose undue burdens on our ability to reasonably make reliable award determinations.

In light of this, it is appropriate to anticipate that a whistleblower who may want a related-action award from any governmental entity should either provide that information directly to the governmental entity or otherwise rely on the Commission in its sole discretion to determine whether to share the information with another governmental entity.

We note that if a whistleblower can identify (or staff is aware of) an instance where this type of sharing of information clearly occurred, and provided that the claimant would be entitled to an award had the individual shared the information directly, the Commission would not be foreclosed from making a related-action award.

See

15 U.S.C. 78mm(a) (Exchange Act provision affording the Commission discretionary waiver authority).

Turning to the multiple-recovery rule that we are adopting as new paragraph (3) of Rule 21F-3(b), this rule is appropriate for all of the reasons specified in the Proposing Release. As we explained, those considerations are: (i) Permitting potential multiple recoveries on a single action could allow a total award in excess of the 30 percent ceiling that Congress has historically imposed in establishing federal whistleblower award programs in the modern era; (ii) in our view, the related-action-award component of the Commission's whistleblower program is intended to allow meritorious whistleblowers the opportunity to obtain a financial award for the ancillary recoveries that otherwise might not be covered by a whistleblower program even though the action resulted from the same original information the whistleblower provided to the Commission; and (iii) permitting whistleblowers to recover under both our award program and a separate award program for the same action would produce the irrational result of encouraging multiple “bites at the apple” in adjudicating claims for the same action and potentially allowing multiple recoveries. This rule codifies the approach the Commission has previously taken where another award program is available in connection with an action for which a related-action award is sought.

See In the Matter of the Claims for Award in Connection with a Notice of Covered Action,

Exchange Act Release No. 34-84046, 2018 WL 4488273 at *6 (Sept. 6, 2018).

In deciding to adopt the rule as proposed, we are unpersuaded by the concerns raised by those commenters who opposed the proposed rule. Although one commenter opposed the rule on the theory that it was unnecessary as the Commission had not encountered a matter involving a potential multiple recovery, as noted, the Commission has, in fact, issued a final order in connection with an award that involved a potential multiple recovery.

Further, we do not believe that our multiple-recovery rule will disincentivize (because of uncertainty about receiving an award or otherwise) whistleblowers from coming to the Commission. Potential whistleblowers still stand to receive an award both for any Commission covered action

and any ancillary action that may produce an award under the alternative whistleblower program. We do not agree that our rule should result in any appreciable additional delay for whistleblowers in receiving an award determination; in assessing this threshold question, the Commission and the CRS should be able to rely on publicly available information to determine the relative relationship of the other governmental entity's action to our whistleblower program and to the other potentially applicable award program.

Id.

And as discussed below in connection with new Rule 21F-6(c), the incentive to come forward to potentially receive an award on a Commission action should be increased as a result of that rule amendment. This is because (subject to certain conditions) Rule 21F-6(c) will establish a presumption where the aggregate maximum award for actions resulting from a whistleblower's original information is $5 million or less (and the negative Award Factors are not present), that the Award Amount be set at the statutory maximum.

We use the term “governmental entity” in the Description of Final Rule Amendments to refer to self-regulatory organizations, state governments and their various agencies, and federal government agencies and departments. The terminology is intended to capture not just governmental entities that may currently have a whistleblower program, but governmental entities that in the future may adopt or oversee a whistleblower program.

We do not believe that our rule should impact a whistleblower's confidentiality protections under Section 21F(h)(2) of the Exchange Act because those protections—to the extent that they apply in any given context—are not contingent on the recovery of an award in connection with another governmental entity's action. We are also unpersuaded that our rule will impose an undue burden on a whistleblower by forcing a whistleblower to submit information to another governmental entity that may have its own whistleblower award program; in our view, if Congress or some other governmental entity has established a whistleblower program, it is not unreasonable to expect that a whistleblower should comply with that program's requirements for submitting information in order to be eligible for an award under it.

As we explained at the time that we proposed this rule, in determining whether a potential related action has a more direct or relevant connection to the Commission's whistleblower program than another award program, the Commission has and will continue to consider the nature, scope, and impact of the misconduct charged in the purported related action, and its relationship to the federal securities laws. This inquiry will include consideration of, among other things: (i) The relative extent to which the misconduct charged in the potential related action implicates the public policy interests underlying the federal securities laws (

e.g.,

investor protection) versus other law enforcement or regulatory interests (

e.g.,

tax collection or fraud against the Federal Government); (ii) the degree to which the monetary sanctions imposed in the potential related action are attributable to conduct that also underlies the federal securities law violations that were the subject of the Commission's enforcement action; and (iii) whether the potential related action involves

state-law claims and the extent to which the state may have a whistleblower award program that potentially applies to that type of law-enforcement action.

To take an example, we would not expect that our program would apply under the new rule to a DOJ action that charges a scheme to avoid tax obligations and imposes monetary sanctions; the IRS's award program would have a more direct and relevant connection to the case than the Commission's whistleblower program.

In addition, we would not expect the IRS's award program to apply to a Commission securities fraud action.

To the extent that a state adopts a whistleblower award program relating directly to state securities law violations, we generally anticipate the Commission will find that the state award program should be the operative whistleblower program to determine whether to reward the whistleblower for that state action rather than the Commission's award program. The state program would likely be the more direct or relevant program and thus the appropriate avenue for the whistleblower to seek an award.

By contrast, to the extent that a DOJ enforcement action centers on insider-trading violations that are based on the same misconduct that was the subject of the Commission's covered action, and that most of the monetary sanctions arise from the insider-trading violations, the Commission will likely treat the matter as a related action notwithstanding any potential restitution ordered due to any tax violations included within the case.

We considered the alternatives advanced by commenters but believe that our approach continues to be appropriate. We disagree that another governmental entity's action should be excluded from our program in all instances when another whistleblower award program might apply; it is preferable to continue to review each such case to determine whether based on the particular facts and circumstances it has a closer relationship to our whistleblower program or the alternative program. We are also unpersuaded that a whistleblower should be able either to collect a supplemental award from us up to a 30 percent total recovery from the various programs (

e.g.,

the Commission would have the discretion to add an additional amount to “cap off” up to 30 percent any award another governmental entity made that was below our statutory cap). Nor are we persuaded that a whistleblower should be allowed to choose which award (

e.g.,

the Commission's award for a related action versus another governmental entity's award for that same related action) to accept after learning the award determination from each of the potentially applicable award programs. These proposals are in our view needlessly inefficient, as both proposals would have both agencies conduct independent assessments of a whistleblower's contribution to the same action; further, as we explained above, including by the example referencing the IRS award program, we do not believe that Congress ever intended for multiple governmental award programs to yield awards on the same action.

Further, we are not persuaded that the potential existence of different eligibility requirements cuts against our rule. If we determine that another award program has a more direct or relevant connection to a particular action brought by another governmental entity, in our view it is fair and reasonable to require the whistleblower to meet all the same criteria and to be subject to the same award considerations that would be applied to any other applicant seeking a recovery under that other program.

One commenter argued that the new rule is inconsistent with the definition of related action in Exchange Act Section 21F(a)(5) because, according to the commenter, the “plain meaning” of that provision states that the Commission “shall pay” an award for an action or proceeding brought by another authority without any qualification or limitation based on the existence of an alternative whistleblower award program.

See

letters from Kohn, Kohn & Colapinto, LLP (Sept. 10, 2020) (“Kohn, Kohn & Colapinto Sept. 10, 2020 Letter”). The Commission has previously noted that, “on its face, Exchange Act Section 21F does not exclude from the definition of related action those judicial or administrative actions . . . that have a less direct or relevant connection to our whistleblower program than another whistleblower scheme.”

In the Matter of the Claims for Award in Connection with a Notice of Covered Action,

Exchange Act Release No. 34-84046, 2018 WL 4488273 at *6 (Sept. 6, 2018). Nonetheless, as the Commission has previously explained, we “perceive ambiguity when considering this language in the context of the overall statutory scheme. We believe that an understanding focused exclusively on the statutory definition of related action would produce a result that Congress neither contemplated nor intended.”

Id.

The commenter further noted that “the whistleblower advocacy community has never supported a `double recovery' concept” and suggested we extend the CFTC “double recovery” rule that the Commission adopted in 2011 so that it bars recoveries from other comparable programs. For the reasons discussed above and in the proposing release, we decline to do so because we believe that the new rule provides the Commission with appropriate flexibility in addressing situations that implicate possible multiple recoveries and should foster a more coherent approach for the resolution of award matters that potentially implicate multiple whistleblower award programs.

Lastly, we have determined to repeal existing Rule 21F-3(b)(3) relating to the CFTC's award program and to allow our new multiple-recovery rule to apply to all actions brought by another governmental entity where one or more alternative whistleblower award programs might apply. A uniform rule to apply in these situations—including where the CFTC's whistleblower award program is implicated—is administratively preferable. This is because the Commission will have the authority under the new rule (based on the specific facts and circumstances of the underlying action) to assess which award program should more logically apply to an action brought by another authority. Under the rule we are repealing, the Commission has no such authority and instead the determination as to which whistleblower program applies is largely controlled (as the existing rule provides for) by the happenstance of which agency (

i.e.,

the SEC or the CFTC) first adjudicates an award application in connection with that action.

D. Rule 21F-6—Clarification of Commission's Discretion

Rule 21F-6 establishes the analytical framework that the Commission follows in exercising its discretion in both setting the appropriate amount of an award in connection with a particular Commission or related action and in determining an individual award for each whistleblower where the Commission makes awards to more than one whistleblower in connection with the same action.

In comments received in response to proposed new paragraphs (c) and (d) of Rule 21F-6 (discussed further below), there appeared to be some confusion regarding the Commission's discretion to consider the dollar amount of monetary sanctions collected, as opposed to focusing exclusively on a percentage amount (

i.e.,

between 10% and 30%) in the statutory range when applying the Award Factors and setting the Award Amount. Certain commenters appeared to assert that nothing in the statute suggests that the Commission, in setting the Award Amount, may consider the actual dollar value of the sanctions collected.

In addition, a hypothetical in the 2018 Proposing Release may have added to this confusion.

As the discussion below demonstrates, the statement that the Commission would be unable to consider the dollar amount, and rather only the percentage amount, in the context of the hypothetical was incorrect and did not reflect the Commission's prevailing understanding of its discretion or its practice in considering and applying the Award Factors and setting Award Amounts.

See

TAF Letter.

See

Whistleblower Program Rules, 83 FR at 34,713-714, nn. 99 & 105 (July 20, 2018).

The Commission has had and continues to have broad discretion in applying the Award Factors and setting the Award Amount, including the discretion to consider and apply the Award Factors in percentage terms,

dollar terms or some combination thereof.

The statutory language in Section 21F demonstrates that Congress gave the Commission the ability—and the discretion—to consider the application of the award criteria provided for in Rule 21F-6(a) and (b) in dollar terms. For example, the language in Section 21F(c)(1) repeatedly refers to the Commission setting the “amount of the award,” which indicates that Congress afforded the Commission discretion to consider the application of the Award Factors, and make an award to a meritorious whistleblower, in dollar terms.

Nothing in the text of Section 21F indicates any intent on the part of Congress to limit the Commission's discretion in this regard.

Indeed, the only reference to percentages in the award provisions of the statute is for purposes of setting the upper and lower bounds in dollar terms for the Award Amount.

15 U.S.C. 78u-6(c)(1)(B)(i)(IV).

see also

Sen. Grassley Letter.

• Large awards are needed to help mitigate the cost of professional and social sanctions that whistleblowers might experience.

130

See, e.g.,

letter from Wampler Buchanan Walker Chabrow Banciella & Stanley, P.A. (Sept. 14, 2018) (“Wampler Letter”); Sen. Grassley Letter.

• The proposed rule would introduce an additional layer of uncertainty for potential whistleblowers and thus could reduce their willingness to assume the risks associated with reporting.

131

See, e.g.,

TAF Letter; NWC Sept. 18 Letter; Better Markets Letter.

• A “cap” would be unfair to individuals who disclose industry-wide frauds because they might no longer be able to work in their chosen field.

132

See

Markopolos Letter.

• Proposed paragraph (d)(2)'s terms such as “reasonably necessary” are “fuzzy” and may result in downward-award adjustments based on political considerations.

133

See

Think Computer Letter.

• The $30 million threshold in proposed paragraph (d)(2) is not based on the value of the particular whistleblower's information or behavior.

134

See

Sen. Grassley Letter;

see also

Wampler Letter; letter from Anonymous-43 (Sept. 9, 2018).

• “By simultaneously increasing the smallest awards and decreasing the largest awards,” the Commission “risks encouraging more low-level employees to report minor fraud while potentially deterring high-level executives from reporting major fraud.”

135

See

Admati & Steele Letter;

see also

Better Markets Letter; Jansson Letter.

3. Final Rule

After considering the comments on this proposed rule and further analysis of the operation of the whistleblower

program to date, we have concluded that it is not necessary to adopt the formalized mechanism for the Commission to exercise its discretion to apply the Award Factors and set Award Amounts, and thus we have determined not to adopt it. We note that many of the comments received demonstrated a misperception of Proposed Rule 21F-6(d)(2) that would have applied to exceedingly large potential awards. A significant number of commenters asserted that this proposed rule would effectively result in Award Amounts being capped or set at the statutory minimum. We think it is important to correct this misunderstanding for potential whistleblowers and the public generally: Proposed Rule 21F-6(d)(2) did not introduce a cap nor was it intended to function in any way as an award cap.

136

Our determination not to adopt proposed paragraph (d)(2) or any other downward-departure mechanism is not intended to imply that we agree with the arguments advanced by the comments opposing it.

G. Rule 21F-6(b)—Interpretive Guidance Regarding the Meaning of “unreasonable delay”

1. Proposed Guidance

Rule 21F-6(b)(2) provides that the Commission will reduce an award if it finds that the whistleblower engaged in “unreasonable delay” in reporting a potential securities-law violation to the Commission. Further, new Rule 21F-6(c)—as discussed above—provides that the presumption under that rule will generally not be available if a whistleblower engaged in unreasonable delay. In the Proposing Release, we explained that any delay in reporting to the Commission beyond 180 days would be deemed presumptively unreasonable.

In proposing this interpretive guidance, we explained that the presumption could be overcome depending on potential highly unusual facts and circumstances of a particular award application connected to the delay. We also cautioned that shorter periods of delay (

i.e.,

less than 180 days) may also qualify as unreasonable depending on the particular facts and circumstances at issue, including, for example, whether the violations were ongoing, whether investors continued to experience harm or the whistleblower continued to profit from the wrongdoing during the period of the whistleblower's delay, or whether the delay had a discernable impact on the monetary sanctions that were ordered in the enforcement action.

2. Comments Received

We received only a few comments on the proposed unreasonable-delay guidance.

137

One commenter voiced support, asserting that the guidance would bring clarity and establish a general bright-line standard that could be adjusted on a case-by-case basis.

138

137

See

TAF Letter; Wampler Buchanan Letter; Think Computer Letter.

138

See

TAF Letter.

Two commenters expressed concerns about the guidance. One asserted that a whistleblower who is genuinely continuing to pursue internal compliance procedures past the 180-day period should not be presumptively deemed to have unreasonably delayed reporting.

139

The other commenter who opposed the guidance expressed the view that the Commission should continue to evaluate unreasonable delay on a case-by-case basis.

140

139

See

Wampler Letter.

140

Think Computer Letter. This commenter noted as an illustration supporting the continuation of a case-by-case basis that it may sometimes be reasonable for a whistleblower to delay beyond 180 days to avoid burdening the Commission with confusing and potentially peripheral information. But once a potential whistleblower knows the relevant facts that comprise a potential securities law violation the potential whistleblower should take appropriate steps to report those facts without delay irrespective of any concern by the whistleblower that certain of the facts may turn out to be peripheral or otherwise not relevant to the potential violation.

3. Final Rule

After considering the comments on this proposed rule and as a result of further analysis of the operation of the whistleblower program, we have determined not to adopt a specific time-based presumption of unreasonable delay as interpretive guidance. We continue to believe that a 180-day time period may be consistent with unreasonable delay in many circumstances. But we are persuaded that the idiosyncratic nature of the various claims the Commission is often presented with counsels in favor of continuing to assess the facts and circumstances of each case. Among other relevant considerations in assessing whether a delay was in part or in whole unreasonable (and whether any reduction is warranted if the delay was unreasonable) include whether the delay was a result of circumstances beyond the whistleblower's control and whether reasonable actions were taken by the whistleblower during the period of delay.

For example, we agree with the commenter who expressed the view that delay by a whistleblower who is genuinely following internal compliance procedures or otherwise genuinely attempting to address the misconduct internally may be reasonable. Specifically, if the whistleblower provides evidence for the administrative record that the whistleblower was continuing to pursue the matter internally and the company's responses to the whistleblower indicated that the company was taking investigatory or remedial action in a diligent and timely fashion, delay of up to or more than a 180-day period may be deemed reasonable under the facts and circumstances. The Commission will also continue to consider, for example, whether a whistleblower's delay was in whole or in part reasonably attributable to illness or other personal or family circumstances or to a reasonable amount of time spent attempting to ascertain relevant facts or obtain an attorney in order to remain anonymous.

The Commission will continue to evaluate whether the violations were continuing during the delay and whether investors were being harmed during that time. Another relevant consideration that the Commission may consider is whether the delay threatened the Commission's ability to pursue the violations either because of the statute of limitations,

141

or the loss or destruction of evidence during the period of delay. The Commission will also continue to consider whether the whistleblower might ultimately profit from the delay by obtaining a larger Award Amount because the failure to report permitted the misconduct to continue, which can affect the calculation of the monetary sanctions, including, for example, increased disgorgement of ill-gotten gains and penalties. The Commission will continue to set awards at amounts that appropriately reflect these considerations.

141

The Supreme Court has held that the Commission may not seek disgorgement or penalties in any enforcement action that is brought after five years of the date the violation occurred.

See Kokesh

SEC,

137 S. Ct. 1635 (2017);

Gabelli

SEC,

568 U.S. 442 (2013).

We continue to encourage whistleblowers to report as early as possible, to ensure the Commission is able to timely address misconduct and, whenever possible, return those funds to harmed investors.

H. Amendment to Exchange Act Rule 21F-2—Whistleblower Status, Award Eligibility, Confidentiality, and Retaliation Protection

1. Proposed Rule

As explained in the Proposing Release, proposed Rule 21F-2 sought to

conform whistleblower status, award eligibility, confidentiality, and retaliation protection in light of the Supreme Court's holding regarding Section 21F in

Digital Realty Trust, Inc.

Somers.

142

Digital Realty,

the Court held that Dodd-Frank's definition of “whistleblower,” codified in Section 21F(a)(6),

143

requires a report to the Commission as a prerequisite for retaliation protection, and that the Commission's broader interpretation of that term in connection with retaliation protection under Section 21F was therefore not entitled to deference.

144

142

138 S. Ct. 767 (2018).

143

15 U.S.C. 78u-6(a)(6).

144

Digital Realty Trust,

138 S. Ct. at 781-82.

In response to

Digital Realty,

proposed Rule 21F-2(a) provided a uniform definition of whistleblower status to apply for all purposes under Section 21F—award eligibility, confidentiality, and retaliation protection—while tracking the “whistleblower” definition in Section 21F(a)(6). Accordingly, proposed Rule 21F-2(a) conferred whistleblower status only on (i) an individual; (ii) who provides the Commission with information “in writing”; and only if (iii) “the information relates to a possible violation of the federal securities laws (including any law, rule, or regulation subject to the jurisdiction of the Commission) that has occurred, is ongoing, or is about to occur.”

Proposed Rules 21F-2(b), (c), and (d) specified how the whistleblower status conferred by paragraph (a) operates across the various contexts of award eligibility, confidentiality, and retaliation protection. Thus, proposed Rule 21F-2(b) specified that, to be eligible for an award in a Commission action based on information provided to the Commission, a person “must comply with the procedures and the conditions described in” Rules 21F-4, 21F-8, and 21F-9. Likewise, proposed Rule 21F-2(c) specified that, to qualify for confidentiality protections afforded by Section 21F(h)(2)

145

based on information provided to the Commission, a person “must comply with the procedures and the conditions described in” Rule 21F-9(a)—that is, must submit information using the Commission's online portal or Form TCR.

145

15 U.S.C. 78u-6(h)(2).

Proposed Rule 21F-2(d) sought to define the scope of retaliation protection under Section 21F consistent with the Supreme Court's holding in

Digital Realty,

by specifying both who is eligible for protection as a whistleblower and also what conduct is protected from employment retaliation.

146

In explaining who is eligible for retaliation protection, proposed Rule 21F-2(d)(1)(i) and (ii) required that a person must “qualify as a whistleblower under section (a) before experiencing the retaliation” for which redress is sought and also must “reasonably believe” that the information provided to the Commission relates to a possible securities law violation. In explaining what conduct is protected from retaliation, proposed Rule 21F-2(d)(iii) required that a person must perform a “lawful act” that both is done in connection with any of the activities described in Section 21F(h)(1)(A)(i)-(iii)

147

and also “relate[s] to the subject matter of” the person's submission to the Commission under proposed Rule 21F-2(a).

146

See Digital Realty Trust,

138 S. Ct. at 777.

147

15 U.S.C. 78u-6(h)(1)(A)(i)-(iii).

Proposed Rule 21F-2(d)(2) resolved a timing issue not addressed by either the statute or the

Digital Realty

decision, by clarifying that a person does not need to qualify as a whistleblower under Rule 21F-2(a) at the time she or he performed the lawful act described in Rule 21F-2(d)(1)(iii), in order to be eligible for retaliation protection; rather, a person eligible for retaliation protection is protected from retaliation for prior lawful acts when the alleged retaliatory conduct occurs after the person qualifies as a whistleblower. Moreover, proposed Rule 21F-2(d)(3) and (4) carried forward provisions of the existing Rule 21F-2 without a substantive change. Paragraph (d)(3) stated that retaliation protection applies regardless of whether a person satisfies all the procedures and conditions to qualify for an award. Paragraph (d)(4) stated that the retaliation prohibition in Section 21F(h)(1) and the rules thereunder shall be enforceable in an action or proceeding brought by the Commission.

2. Comments Received

We received several comments addressing proposed Rule 21F-2's definition of whistleblower status and the scope of retaliation protection.

148

Commenters generally acknowledged the need to revise these aspects of the existing rule to conform to the

Digital Realty

decision.

149

148

We did not receive any comments addressing the following aspects of proposed Rule 21F-2: Limiting whistleblower status to individuals, under proposed Rule 21F-2(a)(2); the clarification of the phrase “securities laws” in Section 21F(a)(6), under proposed Rule 21F-2(a)(1); defining award eligibility and confidentiality, under proposed Rule 21F-2(b) and (c); extending retaliation protection to a lawful act performed in connection with any of the activities described in Section 21F(h)(1)(A)(i)-(iii), under proposed Rule 21F-2(d)(1)(iii)(A); and providing that Section 21F(h)(1) and the rules thereunder shall be enforceable by the Commission, under proposed Rule 21F-2(d)(4).

149

See, e.g.,

CWC Letter; SIFMA Letter.

But see

joint letter from National Employment Lawyers Association, Government Accountability Project, and Public Citizen (Sept. 18, 2018) (“NELA Letter”) (opposing proposed rule to the extent it went further than required by

Digital Realty

); TAF Letter (endorsing comments from NELA); letter from Anonymous-52 (Sept. 7, 2018) (arguing that the Commission should challenge

Digital Realty

as wrongly decided).

Commenters were divided on the proposal to require that a person provide information “in writing” to the Commission in order to qualify for whistleblower status under Rule 21F-2(a)(1). Two commenters supported the “in writing” proposal. One suggested further requiring that information be provided consistent with Rule 21F-9(a)—that is, either on Form TCR or through the online portal—not only for award eligibility and confidentiality, but also for retaliation protection.

150

The other recommended that the Commission make it a practice to physically or electronically date-stamp every written submission.

151

One commenter opposed the “in writing” requirement as too restrictive, since people may make oral reports out of a sense of urgency or fear of retaliation, and since oral reports in the form of interviews or testimony can still provide substantial assistance to the Commission.

152

Three joint commenters opposed the “in writing” requirement as not required by the text of Section 21F and as inconsistent with the statute's remedial purpose, while observing that Section 806 of Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”)

153

and the Fair Labor Standards Act (“FLSA”)

154

have been construed as affording protection to oral reports.

155

These joint commenters also asserted that, contrary to the justifications for this requirement in the Proposing Release, committing oral reports to writing would not pose a burden to the Commission's staff and there was no evidence that past protections for oral reports under Sarbanes-Oxley Section 806 and Exchange Act Section 21F had enmeshed the Commission's staff in disputes in private retaliation lawsuits.

156

150

See

CCMC Letter.

151

See

CWC Letter.

152

See

TAF Letter.

153

18 U.S.C. 1514A.

154

29 U.S.C. 215(a)(3).

155

See

NELA Letter.

156

See id.

Similarly, commenters were divided on the specific request for comment whether the new rule should enumerate any additional “manner” of providing

information to the Commission. One commenter argued against enumerating any of the manners described in clause (ii) of Section 21F(h)(1)(A), such as testimony, since this commenter agreed with the analysis in the Proposing Release that clause (ii) is best read as extending employment retaliation protection to acts of continued cooperation by a person who has already provided information to the Commission.

157

But other commenters supported enumerating the manners described in clause (ii) precisely because Section 21F lists them and because of the Commission's interest in ensuring that persons can testify or otherwise assist the Commission without reprisal.

158

157

See

CWC Letter (citing Whistleblower Program Rules, 83 FR 34,702, 34,718 n.144 (July 20, 2018)).

158

See

NELA Letter.

Commenters offered further feedback on the definition of whistleblower status under proposed Rule 21F-2(a)(1). Some commenters supported the extension of whistleblower status to persons who provide information concerning “possible” violations of the federal securities laws.

159

Another commenter suggested excluding from whistleblower status any individual who participated in wrongdoing, on a theory of unclean hands.

160

159

See id.

160

See

CCMC Letter.

Commenters took opposing views on whether an individual should be required to report to the Commission before receiving retaliation protection under proposed Rule 21F-2(d)(1). One commenter supported this requirement as dictated by the

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decision and observed the logical impossibility of “commit[ting] retaliation

because of

a protected activity that has not yet occurred.”

161

Three joint commenters believed, to the contrary, that this approach, in combination with the proposed protection for “lawful acts” done before the Commission report, would create a loophole by not protecting those who report internally before approaching the Commission, thereby incentivizing prompt firings for internal reports.

162

These commenters further believed this approach would encourage an employer to argue that the employee was fired in retaliation for the internal report rather than the report to the Commission.

163

As an alternative, these commenters proposed that the internal disclosure be deemed an initial step in disclosing to the Commission, and that the employer be required to forward the internal disclosure and its response to the Commission.

164

161

See

CWC Letter (emphasis in original).

162

See

NELA Letter.

163

See id.

164

See id.

Three joint commenters supported the proposal to afford retaliation protection, just as the current rule does, to persons who “reasonably believe” that the information provided to the Commission concerns a possible violation of the federal securities laws under proposed Rule 21F-2(d)(1)(ii).

165

See

NELA Letter.

Commenters disagreed with one another on the limitation under proposed Rule 21F-2(d)(1)(iii)(B) that retaliation protection will attach to a lawful act only if that act “relate[s] to the subject matter of your submission to the Commission under” Rule 21F-2(a). One commenter supported this “subject matter” limitation as embodying the principle that the submission to the Commission establishes the parameters of retaliation protection.

166

Three joint commenters opposed this limitation as not required by either the text of Section 21F or the

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decision and as injecting uncertainty as to how close a nexus would be required between the lawful act and the subject matter of the submission.

167

166

See

CWC Letter.

167

See

NELA Letter.

One commenter urged against the proposal to afford retaliation protection, just as the current rule does, regardless of whether the individual also satisfies the procedures and conditions for award eligibility, under proposed Rule 21F-2(d)(3).

168

This commenter instead advocated for expressly treating the procedures and conditions for award eligibility under Rules 21F-4, 21F-8, and 21F-9 as prerequisites for retaliation protection.

169

168

See

CCMC Letter.

169

See id.

Commenters were divided in responding to the request for comment whether participation in internal compliance systems should continue to be considered in determining the amount of an award, given the change in retaliation protection resulting from the

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decision. Two commenters

170

as well as three joint commenters

171

supported retaining this factor in the award analysis. One commenter believed that doing so would maintain the incentives for robust internal compliance programs, which the commenter described as the first and best line of defense against violations of the federal securities laws.

172

This commenter also suggested that the Commission consider an explicit program that, in appropriate cases where an individual bypasses internal compliance and goes directly to the Commission, would allow the company to run its own internal investigation and report the results before the Commission staff takes substantial investigative steps.

173

A second commenter similarly cited the benefits of internal compliance programs for both employers and employees,

174

while three joint commenters suggested that the Commission should retain this award factor while actively warning individuals about the limitations on retaliation protection for internal disclosures.

175

170

See

CWC Letter; SIFMA Letter.

171

See

NELA Letter.

172

See

SIFMA Letter.

173

See id.

174

See

CWC Letter.

175

See

NELA Letter.

Five commenters opposed keeping participation in internal compliance systems as a consideration in determining the amount of an award, reasoning that the

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decision leaves such reports unprotected from retaliation.

176

One commenter stated that it is simply not practical to assume that individuals will always be able to submit reports simultaneously to the Commission and to an internal compliance program.

177

Three commenters argued that any provisions to encourage internal reports would be illegal in light of the Supreme Court's recognition in

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that Congress designed Section 21F not to encourage internal reports but to encourage reports to the Commission.

178

These same three commenters further suggested that the Commission clarify that the internal compliance programs addressed in proposed Rule 21F-2 do not include internal investigations led by company counsel and that the Commission eliminate existing Rule 21F-4(b)(4)(iii), which generally requires certain employees in managerial, compliance, and other positions as well as auditors to wait 120 days before reporting to the Commission.

179

On the elimination of Rule 21F-4(b)(4)(iii), these three commenters were joined by a fourth.

180

176

See

letter from Anonymous-64 (Aug. 21, 2018) (“Anonymous-64 Letter”); Sen. Grassley Letter; Kohn, Kohn & Colapinto July 24 Letter; Morrell Letter; TAF Letter.

177

See

Sen. Grassley Letter.

178

See

Anonymous-64 Letter; Kohn, Kohn & Colapinto July 24 Letter; Morrell Letter.

179

See id.

180

See

Sen. Grassley Letter.

Commenters also took opposing views on whether proposed Rule 21F-2 should enumerate additional forms of retaliation as falling within the prohibition in Section 21F(h)(1)(A). One

commenter endorsed enumerating “downstream” conduct such as preventing a whistleblower from obtaining future employment,

181

while another commenter opposed doing so based on its assertion that the law is less clear as to retaliation protection for future employment.

182

Three joint commenters supported broadly construing the retaliation prohibition to encompass any employment action that is reasonably likely to deter employees from engaging in protected activity.

183

181

See

TAF Letter.

182

See

CWC Letter (citing

Dellinger

Science Applications Int'l Corp.,

649 F.3d 226 (4th Cir. 2011)).

183

See

NELA Letter (citing

Burlington N. & Santa Fe Rwy. Co.

White,

548 U.S. 53 (2006)).

3. Final Rule

After considering the comments, we are adopting Rule 21F-2 as proposed, with the addition of interpretive guidance defining the scope of retaliatory conduct prohibited by Section 21F(h)(1)(A). In addition, in the Proposing Release we observed that proposed Rule 21F-2 would render inapplicable the formal interpretation that the Commission issued in 2015 regarding the meaning of Exchange Act Rule 21F-9.

See

83 FR at 34718 n.193 (citing Interpretation of the SEC's Whistleblower Rules under Section 21F of the Securities Exchange Act of 1934, 80 FR 47829 (Aug. 10, 2015)). That formal interpretation explained that compliance with Exchange Act Rule 21F-9 was not required to qualify as a whistleblower for purposes of Section 21F's employment retaliation protections.

See

80 FR at 47830. Because the

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decision has since adopted a narrower reading of what is required to qualify as a whistleblower for Section 21F's employment retaliation protections, we now repeal that interpretive guidance as obsolete.

4. Whistleblower Status Under Rule 21F-2(a)

Requiring information to be provided to the Commission “in writing” as a condition of whistleblower status under Rule 21F-2(a) appropriately addresses the interests of affording flexibility to persons who report to the Commission and promoting reasonable certainty and efficiency for the Commission, including for the Commission staff who receive and process such reports. Were the rule to require that such reports also comply with Rule 21F-9(a)—that is, that they be made either on Form TCR or through the online portal—for retaliation protection, as one commenter suggested,

184

the burden to persons making such reports would increase without any corresponding benefit. As the Proposing Release explained, compliance with Rule 21F-9(a) is required in other contexts because it allows precise and reliable tracking of information for determining award eligibility as well as for helping clarify which submitters should receive heightened confidential treatment. There would be no similar benefit in the retaliation context, however, where the key issue following

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is not how the information was handled by the Commission's staff but whether the information was provided to the Commission at all.

185

184

See

CCMC Letter.

185

As for the suggestion that the staff make it a practice to date-stamp every written submission,

see

CWC Letter, we observe that it is already the staff's practice to upload to the TCR System, upon receipt, every written report of a possible securities law violation. That system automatically generates an electronic record of the date and time the corresponding TCR is created within the system.

Nor are we persuaded that the “in writing” requirement is too onerous, as other commenters suggested.

186

Our experience to date in the awards context suggests that this requirement presents, at most, a minimal burden to individuals who want to report potential securities law violations to the Commission while facilitating the staff's use of the information. To the degree that some individuals may face urgent circumstances,

187

the “in writing” requirement affords ample flexibility in the means of transmission—for example, online submission, email, facsimile, or U.S. Mail—to meet that urgency. Moreover, given that

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has altered the legal landscape by strictly limiting retaliation protection to persons who have reported to the Commission, as distinct from persons who report internally, we anticipate that direct reports to the Commission may increase, and so protecting oral reports to the Commission could result in litigation disputes about what information was orally provided and on what dates. We decline the invitation of three joint commenters

188

to investigate how many such disputes arose in the past, since the

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decision is likely to encourage more direct reports to the Commission and thus any earlier data would likely have limited predictive value under the post-

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regime.

186

See, e.g.,

TAF Letter.

187

See id.

188

See

NELA Letter.

Nor is a contrary result required by judicial decisions finding oral reports protected under Sarbanes-Oxley Section 806 and the FLSA, since those decisions typically addressed oral reports made internally to an employer who necessarily had a pre-existing employment relationship with the complainant.

189

Our rule, by contrast, must preserve administrative efficiency and reliability while addressing external reports to the Commission from members of the public throughout the country and, indeed, across the globe.

190

Exchange Act Section 21F(a)(6) allows us discretion to determine the required “manner” of providing information, and we conclude that limiting whistleblower status to reports made “in writing” is the better programmatic approach for the reasons above.

189

See id.

(collecting cases). Indeed, the cited Supreme Court decision addressing the FLSA did not extend retaliation protection to all oral reports, but only to those oral reports sufficient to give the employer fair notice that the employee was making a complaint.

See Kasten

Saint-Gobain Performance Plastics Corp.,

563 U.S. 1, 11-14.

190

See

Office of the Whistleblower, 2018 Annual Report to Congress 22-23 (2018) (documenting geographic dispersal of whistleblowers throughout the United States and from 72 other countries during fiscal year 2018).

In addition to keeping the “in writing” requirement, we have decided to adopt proposed Rule 21F-2(a) without specifying any other “manners” of providing information to the Commission. Although some commenters suggested that we specify the additional conduct enumerated in clause (ii) of Section 21F(h)(1)(A), such as testimony in an action brought by the Commission, we adhere to our analysis of clause (ii) in the Proposing Release. In particular, because clause (ii) refers to “such information” provided under the preceding clause (i), we continue to believe that clause (ii) is more reasonably understood as extending employment retaliation protection to acts of continued cooperation by a person who has already provided information to the Commission. And, as a practical matter, providing information to the Commission in writing presents a minimal burden for any individual who wants to receive retaliation protection under Section 21F for s

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