* Rule rewards whistleblowers for tips
* Does not mandate internal reporting first
* SEC says already getting useful information
* Republican commissioners dissent
* U.S. Chamber of Commerce blasts rule
(Adds mention of whistleblower history, Khuzami comment)
By Sarah N. Lynch
WASHINGTON, May 25 Corporate whistleblowers
could score multi-million-dollar payouts for reporting
financial wrongdoing under a new program approved by U.S.
securities regulators on Wednesday.
A divided U.S. Securities and Exchange Commission voted 3-2
to finalize the measure that has grown into one of the most
contentious requirements of last year's Dodd-Frank Wall Street
Tipsters would be paid between 10 and 30 percent of
sanctions over $1 million for original and useful information.
Companies from Google Inc (GOOG.O) to JPMorgan Chase & Co
(JPM.N) have expressed fears the whistleblower rule will
undermine internal compliance programs at public companies by
encouraging employees to go directly to the SEC.
The rule does not require whistleblowers to first, or
simultaneously, report problems internally, as companies had
In a concession to companies, the final SEC version would
make a whistleblower still eligible for a reward if he or she
reports wrongdoing to the company, and the company, in turn,
reports it to the SEC.
A whistleblower can also improve the chances of receiving a
higher percentage award by internal reporting, but the rule
only protects the whistleblower from retaliation if the
employee also reports wrongdoing to the SEC.
Business interests such as the U.S. Chamber of Commerce
remain deeply unhappy about the rule and could appeal in court.
The SEC had put "trial lawyer profits ahead of effective
compliance," the chamber said in a statement.
Rewarding whistleblowers has a long history in the United
Last year the U.S. Department of Justice gave former
GlaxoSmithKline Plc (GSK.L) employee Cheryl Eckard a $96
million reward under the U.S. False Claims Act, a Civil War-era
law designed to uncover efforts to defraud government
BREAK THE SILENCE
The SEC rule greatly expands the agency's authority to
reward whistleblowers. Prior to Dodd-Frank the SEC could only
reward whistleblowers for tips on insider-trading cases.
"Today's rules are intended to the break the silence of
those who see a wrong," said SEC Chairman Mary Schapiro.
She said the final measure struck the correct balance
between encouraging whistleblowers to report problems
internally when appropriate, while providing the option of
heading directly to the SEC.
SEC enforcement chief Robert Khuzami told the SEC's public
meeting on Wednesday that the rule was already encouraging
people to come forward. People who provided tips after
Dodd-Frank was signed into law last July could be eligible for
The SEC's two Republican commissioners voted against the
rule and raised numerous concerns, from its impact on internal
compliance to fears it may inundate the SEC with complaints
that do not prove to be fruitful.
"It significantly underestimates the negative impact on
internal compliance programs and significantly overestimates
our capacity to effectively triage and manage whistleblower
complaints," said SEC Commissioner Kathleen Casey.
Supporters of the rule, such as the National Whistleblowers
Center, lauded the agency for resisting opposition from
The rule is expected to take effect 60 days after it is
published in the Federal Register.
The Commodity Futures Trading Commission is working on a
(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)