The date for the SEC to adopt final rules for the Whistleblower Incentives & Protection Program under Dodd-Frank is slipping.
By law, the final rules were supposed to be in place “no later than April 21, 2011 (9 months from enactment).” The SEC went even further, saying the rules would be in place early.
That didn’t happen. Now, according to the SEC’s calendar, adoption of the final rules will be in the “May – July 2011” time slot.
What’s the delay mean?
Well, for whistleblowers, not much, at least for now. The way the law was written and the temporary rules applied, whistleblowers who came forward after July 22, 2010 were already protected from retaliation, and entitled to rewards of ten to thirty percent of any “successful enforcement action yielding monetary sanctions over $1 million.”
But for the SEC and issuers, the delay may mean something more. Since the whistleblower program was first announced, businesses and their advisors have been pushing back. The main complaint is that whistleblowers have no obligations to first report compliance issues inside their companies. Instead, they’re allowed to complain directly to the SEC. Bypassing existing compliance programs, commenters have argued, is already diverting corporate resources and weakening existing compliance programs.
Is the SEC listening?
Just last month, Robert Khuzami, the director of the SEC’s enforcement division, said the final rules would happen on schedule. He told a gathering of compliance professionals in Phoenix that the SEC had “received and studied many comments to the proposed rule, and adoption of the rule is set for April.”
As we said then, Mr. Khuzami gave issuers and their compliance officers little to cheer about.
And yet, the SEC’s April deadline has now come and gone.
Let’s hope that means common sense may prevail after all.
Our thanks to Michael H. Huneke at Hughes Hubbard & Reed LLP’s Washington, D.C. office for the heads up about the SEC’s delay in adopting the final whistleblower rules.