high-ranking corporate executives at companies of varying sizes.
Each whistleblower award determination is based on the facts and
circumstances of the case, including the monetary sanctions
collected. Based on this subset of prior cases, a large majority of
these executives received awards that were under $5 million.
    \120\ We would generally contemplate using publicly available
data on compensation levels in making this determination. Award
applicants could submit information as part of their award
application to the extent that they are concerned that the proposed
rule might be implicated by their application.
    \121\ The existence of any of these facts would not foreclose
the Commission from finding that any large payout that exceeded the
$30 million floor in proposed rule 21F-6(d) was nonetheless not
reasonably necessary to achieve the program's goals and to thus
reduce the award to an appropriate amount. Conversely, the absence
of special circumstances or extraordinary sacrifices does not mean
that the Commission would in all cases determine to reduce the
amount of the award.
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    In making any downward adjustment to a large award, the Commission
would retain discretion to determine the appropriate award amount and
proposed paragraph (d) is not intended to mandate any specific
reduction or one-size-fits-all result. Nonetheless, we anticipate that
in those cases where proposed paragraph (d) is triggered and the
Commission determines that a downward adjustment is warranted, the
extent to which the Commission exercises its authority to decrease such
awards would vary along a sliding scale that corresponds with the
overall size of the potential award in dollar terms. For example, we
generally anticipate that the nature and magnitude of any decrease
applied to an award in the $35-40 million range would typically be less
than the magnitude of the decrease applied to an award in the $100-$150
million range. In our view, this sliding-scale approach would make
sense because the larger the dollar amount of a payout away from the
$30 million floor, the greater the likelihood of diminishing marginal
benefits to the program from each additional dollar paid to the
whistleblower. In no event, however, would the Commission decrease an
award below the $30 million floor (or whatever future floor the
Commission might establish by order) using the authority afforded to
the Commission pursuant to the proposed rule.
    We preliminarily contemplate that proposed paragraph (d) would be
applied in any instance where the Commission determines to process two
or more separate covered actions together in the same final order,
provided that both actions involve the same information submitted by
the whistleblower. We would similarly expect that the Commission could
apply this rule if, after having made an award to a whistleblower, the
Commission subsequently processes an award application for that
whistleblower (either in connection with a second covered action or a
related action) and the subsequent award application is based on the
same general information from the whistleblower as the earlier award
determination.
    We do not believe that the proposed rule conflicts with the
statutory directive in Section 21F(c)(1)(B)(ii) \122\ that ``[i]n
determining the amount of an award,'' the Commission ``shall not take
into consideration the balance of the [IPF].'' This statutory provision
prevents the Commission from adjusting an individual award based on the
availability of money in the IPF. Critically, proposed paragraph (d)
would not permit the Commission to consider the balance of the IPF when
determining whether an award should be reduced. Rather, as noted above,
paragraph (d) would only authorize the Commission to consider whether a
potential award payout exceeds an amount that is reasonably necessary
to achieve the program's goals. In this way, proposed paragraph (d)
would provide a mechanism for the Commission to ensure that it is
granting awards in an efficient and effective manner that serves the
``twin goals of protecting investors and increasing public confidence
in the markets'' \123\ and our adoption of this proposed rule would be
within our authority to adopt ``additional relevant [award] factors.''
\124\ To make this clear, we are adding a provision to proposed
pararagraph (d) stating that the Commission shall not take into account
the balance of the IPF in determining whether to make a downward
adjustment under the proposed paragraph or in making any other award
determinations under Exchange Act Rule 21F-6.
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    \122\ 15 U.S.C. 78u-6(c)(1)(B)(ii).
    \123\ 76 FR 34300, 34356/2.
    \124\ Exchange Act section 21F(c)(1)(B)(iv); 15 U.S.C. 78u-
6(c)(1)(B)(iv).
---------------------------------------------------------------------------

    Finally, the proposed rule would provide certain standards for the
Commission to consider in determining whether to issue an order that
adjusts the $2 million award threshold, the $100 million threshold, and
the $30 million award(s) floor under proposed paragraphs (c) or (d),
respectively. Specifically, the proposed rule would state that in
issuing such an order ``the Commission shall consider (among other
factors that it deems relevant) whether the adjustment is necessary or
appropriate to encourage whistleblowers to come forward and the
potential impact the adjustments might have on the Investor Protection
Fund.''
* * * * *
    Guidance regarding the meaning of ``unreasonable delay'' in
existing Rule 21F-6(b)(2) and proposed Rule 21F-6(c). In proposing the
foregoing modifications to the criteria that govern award
determinations, we believe it is appropriate to provide guidance on our
approach regarding ``unreasonable delay'' as relates to an award
determinations. We believe that any delay in reporting to the
Commission beyond 180 days is presumptively unreasonable. In light of
the Supreme Court's recent decisions in Kokesh v. SEC \125\ and Gabelli
v. SEC,\126\ delay on the part of a whistleblower can have a
debilitating impact on the Commission's ability to make a full recovery
of ill-gotten gains and to obtain civil penalties and, in this way,
delay may impair our ability to return funds to investors who have been
harmed by the wrongdoing. Further, although this 180-day presumption is
not expressly codified in either Exchange Rule 21F-6(b)(2),\127\ which
deals with ``unreasonable delays,'' or the rule that we are proposing,
we would typically expect to treat any delay exceeding this period as
unreasonable for purposes of both rules going forward. That said, in
assessing unreasonable delay under both the existing rule and the
proposed rule, we would still consider any highly unusual facts and
circumstances of a particular award application in assessing
unreasonable delay, such that the general presumption of ``unreasonable
delay'' might be overcome in certain rare instances. Finally, we
caution that

shorter periods of delay (i.e., less than 180 days) may also readily
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. Put simply, a whistleblower who delays reporting to the
Commission should expect that his or her ``reward'' for reporting might
well be negatively impacted.
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    \125\ 137 S. Ct. 1635 (2017) (providing that the Commission must
bring any enforcement action seeking to obtain disgorgement within
five years of the date the violation occurred).
    \126\ 568 U.S. 442 (2013) (providing that the Commission must
bring any enforcement action seeking to obtain civil penalties
within five years of the date the violation occurred).
    \127\ 17 CFR 240.21F-6(b)(2).
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Request for Comment
    10. With respect to proposed paragraph (c), is it appropriate to
consider increasing smaller awards and would doing so help to further
incentivize insiders and others to come forward with tips? If so, is
the $2 million ceiling for invoking the rule appropriate or is it
either too high or too low? Please explain.
    11. With respect to proposed paragraph (c), should the enhancement
authority be unavailable in the situation where a whistleblower's award
was reduced under Rule 21F-6(b) or Rule 21F-16? Please explain.
    12. Would the proposed amendments to paragraph (d) of Rule 21F-6
appropriately balance the Commission's various programmatic interests,
in particular encouraging company insiders and others to come forward
while also ensuring that awards are not unnecessarily large beyond an
amount that is sufficient to compensate whistleblowers and achieve the
Commission's law-enforcement interests? If not, is there an alternative
formulation of the proposed rule that the Commission should adopt to
guard against payouts that are in excess of amounts that are reasonably
necessary to further the Commission's goals?
    13. With respect to proposed paragraph (d), are the $100 million
collected sanctions threshold and the $30 million floor appropriate? Is
there another threshold or floor that the Commission should adopt? If
so, please explain what should be the appropriate threshold or floor.
    14. In considering whether to make a downward adjustment to a
potential award under proposed paragraph (d), is it reasonable for the
Commission to consider the likely amount of the award in relation to
the whistleblower program's goals of rewarding meritorious
whistleblowers and sufficiently incentivizing future similarly situated
whistleblowers?
    a. In the release, we explain that facts that would be relevant to
determining whether the large payout may be appropriate given the
specific whistleblower's circumstances include, for example, whether
the whistleblower made an extraordinary and highly unusual sacrifice by
coming forward (such as placing himself or herself in legal jeopardy to
bring the Commission information that it would otherwise not have been
able to obtain or demonstrably suffering career-ending consequences
commensurate with the potential large award). Are there other (or
additional) considerations that the Commission should assess in making
that determination?
    b. Also in the release, we explain that facts that would be
relevant to determining whether the large payout is needed and
appropriate to encourage future similarly situated whistleblowers to
come forward include the industry in which knowledgeable whistleblowers
might work, the type of position held by that whistleblower, and the
compensation levels within that industry, and whether potential
whistleblowers may be located overseas and the likely compensation
levels in those countries (to the extent available). Are there other
(or additional) considerations that the Commission should assess in
making that determination?
    15. In the context of two or more individuals acting together as a
whistleblower, should the $30 million floor in proposed paragraph (d)
apply where the aggregate award to both individuals exceeds $30 million
or where the award to each individual would potentially exceed $30
million? Please explain the reasons for your views.
    16. In determining whether the $100 million threshold has been met
for application for the proposed rule, should the Commission consider
not just the likely payout in any Commission covered action that
results from the original information that the whistleblower provided
to the Commission, but also any potential payout that might result from
any related actions? Why or why not?
    17. As discussed above, the Commission could apply proposed
paragraph (d) if, after having made an award to a whistleblower, the
Commission subsequently processes an award application for that
whistleblower (either in connection with a second covered action or a
related action) and the subsequent award application is based on the
``same general information'' from the whistleblower as the earlier
award determination. Is there a different standard that the Commission
should apply for invoking the rule in these situations? In particular,
should the proposed rule be applicable in either a narrower or a
broader set of circumstances where information provided by a
whistleblower results in multiple actions? Please explain the reasons
for your view.
    18. Proposed paragraph (d) would permit the Commission to consider
the potential dollar amount of the award when applying each of the
existing award criteria in Exchange Act Rule 21F-6(a) and 6(b),
provided that the Commission determined that the likely total payout to
the whistleblower resulting from the original information that he or
she provided was $100 million or greater. As explained above, this
would allow the Commission to consider each award factor in dollar
terms rather than to apply exclusively a percentage assessment that
does not take into account what those percentage adjustments would
translate to in actual dollars paid to the whistleblower.
    a. Should the Commission consider the dollar value of an award that
involves the collection of at least $100 million in monetary sanctions
in determining the size of the award? Why or why not?
    b. As part of this rulemaking, should we expand this approach so
that it would cover all awards considered under Exchange Act Rule 21F-
6, even those below the $100 million threshold? Would such a revision
to the award determination approach under Exchange Act Rule 21F-6 allow
us to better assess each enhancement or reduction in dollar terms (as
well as percentage terms) so that we could more realistically and
concretely assess the impact of each award factor on the overall award
to ensure that we are appropriately rewarding the whistleblower and
incentivizing future whistleblowers? Why or why not?
    19. With respect to the interpretive guidance concerning
``unreasonable delay,'' is the 180-day rebuttable presumption of
unreasonable delay appropriate? Does establishing such a presumption
help to put individuals on notice that they should come forward without
an inappropriate delay? Please explain.

E. Proposed Amendment to Exchange Act Rule 21F-2 128
Addressing Whistleblower Status and Certain threshold Criteria Related
to Award Eligibility, Heightened Confidentiality From Identity
Disclosure, and Employment Anti-Retaliation Protection 129
---------------------------------------------------------------------------

    \128\ 17 CFR 240.21F-2.
    \129\ The Commission anticipates that this proposed rule change,
if adopted, would apply as follows: With respect to employment
retaliation claims, the proposed rule would apply only to
employment-retaliation violations occurring after the effective date
of the rules; with respect to award eligibility and confidentiality
protections, the proposed rule would apply only to information about
a potential securities law violation that is submitted for the first
time by an individual after the effective date of the rules.
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    As adopted by the Commission in 2011, Rule 21F-2(a) \130\ describes
the qualifications to be a whistleblower for purposes of the award
program and heightened confidentiality protections, and Rule 21F-2(b)
\131\ provides a separate, broader definition of the term that is
applicable to the employment anti-retaliation provisions in Section
21F(h)(1) of the Exchange Act.\132\ Specifically, unlike Rule 21F-2(a),
Rule 21F-2(b) defines a whistleblower not by reference to the statutory
definition of the term in Exchange Act Section 21F(a)(6) \133\--i.e.,
as one who reports to the Commission--but instead by reference to the
protected activities described in Section 21F(h)(1)(A)(i)-(iii),
including the internal reporting described in clause (iii) of that
provision.\134\ The Supreme Court recently held in Digital Realty
Trust, Inc. v. Somers,\135\ however, that a whistleblower under Section
21F of the Exchange Act must report a possible securities law violation
to the Commission in order to qualify for employment retaliation
protection under Section 21F(h)(1), and that the Commission's rule
interpreting the term more broadly in connection with Section 21F's
retaliation protections was therefore not entitled to deference.\136\
The Court reasoned that Dodd-Frank's definition of ``whistleblower,''
codified in Section 21F(a)(6), requires such a report to the Commission
as a prerequisite for anti-retaliation protection, and that this
definition is ``clear and conclusive.'' \137\ The Court also determined
that strict application of the definition's reporting requirement in
the employment anti-retaliation context is consistent with Congress's
core objective of `` `motivat[ing] people who know of securities law
violations to tell the SEC.' '' \138\
---------------------------------------------------------------------------

    \130\ 17 CFR 240.21F-2(a).
    \131\ 17 CFR 240.21F-2(b).
    \132\ 15 U.S.C. 78u-6(h)(1).
    \133\ 15 U.S.C. 78u-6(a)(6).
    \134\ 15 U.S.C. 78u-6(h)(1)(A)(i)-(iii).
    \135\ 138 S. Ct. 767 (2018).
    \136\ Digital Realty, 138 S. Ct. at 781-82.
    \137\ Id.
    \138\ Id. at 777 (quoting S. Rep. No. 111-176, at 38 (2010)).
---------------------------------------------------------------------------

    Accordingly, we believe that it is appropriate to amend Rule 21F-2
to conform to the Supreme Court's construction of Section 21F. Proposed
Rule 21F-2(a) would provide a uniform definition for whistleblower
status to apply for all purposes under Section 21F--award eligibility,
confidentiality protections, and anti-retaliation protections--
consistent with the Supreme Court's application of the whistleblower
definition in Section 21F(a)(6), which defines the term
``whistleblower'' as any individual who provides, or 2 or more
individuals acting jointly who provide, information relating to a
violation of the securities laws to the Commission, in a manner
established, by rule or regulation, by the Commission.\139\
---------------------------------------------------------------------------

    \139\ 15 U.S.C. 78u-6(a)(6).
---------------------------------------------------------------------------

    Proposed Rule 21F-2(a) would track this whistleblower definition by
conferring 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.'' We address these three points in turn.
    First, proposed Rule 21F-2(a)(2) would provide whistleblower status
to individuals and not to legal entities (such as corporations). This
proposed provision would carry forward the similar language in existing
Rule 21F-2(a)(1) without substantive change. We believe this position
follows from the use of the term ``individual'' in the whistleblower
definition in Section 21F(a)(6) and is consistent with the focus in
Section 21F(h)(1)(A) on retaliation by employers in the terms and
conditions of employment.
    Second, proposed Rule 21F-2(a)(1) would afford whistleblower status
only to an individual who provides the Commission with information ``in
writing.'' As the Supreme Court recognized,\140\ the whistleblower
definition in Section 21F(a)(6) gives the Commission express authority
to establish the required ``manner'' of reporting by rule or
regulation. In the awards eligibility and confidentiality contexts, our
whistleblower rules (specifically, Rule 21F-2(a)(2) \141\ and Rule 21F-
9(a) \142\) already require that information be provided to the
Commission in writing either through the online portal at www.sec.gov
or by mailing or faxing a Form TCR (Tip, Complaint or Referral) to the
Commission's Office of the Whistleblower. We now believe it is
appropriate to exercise our discretion to require that an individual
provide information ``in writing'' to the Commission to qualify as a
``whistleblower,'' not only in the awards and confidentiality context
but also in the anti-retaliation context.\143\ Our experience to date
in the awards context suggests that requiring that information be
provided in writing presents, at most, a minimal burden to individuals
who want to blow the whistle to the Commission while facilitating the
staff's ability to track its use of the information. Moreover, if we
recognized additional manners of reporting for anti-retaliation
purposes (such as placing a telephone call), the Commission's staff
could be ensnared by disputes in private anti-retaliation lawsuits over
what information was provided to whom on what dates. Requiring that any
reporting be done in writing obviates these difficulties.\144\
---------------------------------------------------------------------------

    \140\ Digital Realty, 138 S. Ct. at 781 (``[T]he statute
expressly delegates authority to the SEC to establish the `manner'
in which information may be provided to the Commission by a
whistleblower.'') (citing Section 21F(a)(6)).
    \141\ 17 CFR 240.21F-2(a).
    \142\ 17 CFR 240.21F-9(a).
    \143\ We believe that Section 21F(a)(6) and Digital Realty do
not require a uniform ``manner'' of providing information for all
purposes under Section 21F, and that we have discretion whether to
specify different manners for the awards, confidentiality, and
retaliation contexts. But we believe that specifying a uniform
``manner'' of providing information--that is, in writing--for all
three contexts is appropriate for the reasons that follow in the
discussion above. See also 15 U.S.C. 78u-6(c)(2)(D) (``No award
under subsection (b) shall be made . . . to any whistleblower who
fails to submit information to the Commission in such form as the
Commission may, by rule, require.'').
    \144\ We believe it appropriate not to enumerate the activities
in Section 21F(h)(1)(A)(ii) (specifically, ``initiating, testifying
in, or assisting in any investigation or judicial or administrative
action of the Commission'') as additional manners of providing
information to the Commission under Section 21F(a)(6). See Digital
Realty, 138 S. Ct. at 781 (``Nothing in today's opinion prevents the
agency from enumerating additional means of SEC reporting--including
through testimony protected by clause (ii)'' of Section
21F(h(1)(A).). Given clause (ii)'s cross-reference to ``such
information'' provided under clause (i), we believe that clause (ii)
is best read as extending employment retaliation protections to acts
of continued cooperation by a person who has already provided
information to the Commission.
---------------------------------------------------------------------------

    Third, proposed Rule 21F-2(a)(1) would afford whistleblower status
only to an individual who provides the Commission with information that
``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.'' Much of this language carries over from
existing Rule 21F-2 \145\ and simply reflects the extent to which that
provision already tracked the whistleblower definition in Section
21F(a)(6). At the same time, we are mindful of the whistleblower
definition's focus on ``information relating to a violation of the
securities laws'' \146\ and of the Supreme Court's admonition that
Section 21F, as enacted by Dodd-Frank, is ``a law concerned only with
encouraging the reporting of `securities law violations,' '' as opposed
to other types of misconduct.\147\ Consistent with that statutory
language and purpose, we believe it is appropriate to clarify what is
implicit in the phrase ``securities laws''--namely, that whistleblower
status (and thus Section 21F's employment retaliation protection)
extends only to reports of possible violations of federal law, not
state law, and that it extends broadly to reports of possible
violations of any law, rule, or regulation subject to the jurisdiction
of the Commission.\148\ Although Section 3(a)(47) of the Exchange Act
defines the phrase ``securities laws'' more narrowly as encompassing
only certain statutes,\149\ by its terms that definition only applies
``unless the context otherwise requires.'' \150\ We believe that the
context of Section 21F requires departing from that definition, given
the textual clues that Congress designed Section 21F to encompass
whistleblowing with respect to the full sweep of federal securities
statutes, rules, and regulations,\151\ given Congress's core objective
of `` `motivat[ing] people who know of securities law violations to
tell the SEC,' '' \152\ and given the many securities regulations whose
reported violations would fail to trigger award eligibility and anti-
retaliation protection if ``securities laws'' were more narrowly
defined.\153\
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    \145\ 17 CFR 240.21F-2(a)(1).
    \146\ 15 U.S.C. 78u-6(a)(6) (emphasis added).
    \147\ Digital Realty, 138 S. Ct. at 781 (quoting S. Rep. No. 11-
176, at 38).
    \148\ As proposed, Rule 21F-2 would not repeat the parenthetical
``(including any law, rule, or regulation subject to the
jurisdiction of the Commission)'' when the phrase ``federal
securities laws'' reappears later in the rule. This would be
strictly for concision and ease of reading, and not to imply any
difference of meaning.
    \149\ Section 3(a)(47) of the Exchange Act states that the term
``securities laws'' means the Securities Act of 1933 (15 U.S.C. 78a
et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), the Sarbanes-Oxley Act of 2002, the Trust Indenture Act of
1939 (15 U.S.C. 77aaa et seq.), the Investment Company Act of 1940
(15 U.S.C. 80a-1 et seq.), the Investment Advisers Act of 1940 (15
U.S.C. 80b et seq.), and the Securities Investor Protection Act of
1970 (15 U.S.C. 78aaa et seq.).
    15 U.S.C. 78c(a)(47).
    \150\ 15 U.S.C. 78c(a).
    \151\ See, e.g., Section 21F(h)(1)(A)(iii) (protecting
``disclosures that are required or protected under . . . any other
law, rule, or regulation subject to the jurisdiction of the
Commission'').
    \152\ Digital Realty, 138 S. Ct. at 777 (quoting S. Rep. No.
111-176, at 38).
    \153\ See American Bankers Assn v. SEC, 804 F.2d 739, 753 (D.C.
Cir. 1986) (``We read the context clause [in Section 3 of the
Exchange Act] as meaning only that if in the case of a frequently
occurring statutory term, its immediate context suggests that a
literal application of the statutory definition would produce absurd
consequences or run counter to the obvious thrust of the section,
the agency may appropriately modify the definition.'') (emphasis
added).
---------------------------------------------------------------------------

    Additionally, proposed Rule 21F-2(a) would confer whistleblower
status ``as of the time that'' an individual meets all three of the
above conditions. We believe that this language would clarify that
whistleblower status is conferred only prospectively and not
retrospectively once all three conditions to achieve whistleblower
status are met.
    Proposed Rule 21F-2(b), (c), and (d) would specify how the
whistleblower status conferred by subsection (a) operates across the
various contexts of awards eligibility, confidentiality protections,
and anti-retaliation protections, respectively. Much like current Rule
21F-2(a), proposed Rule 21F-2(b) would specify 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 (respectively,
sections 240.21F-4, 240.21F-8, and 240.21F-9 of this chapter).'' \154\
Proposed Rule 21F-2(b) reiterates, ``You should carefully review those
rules before you submit any information that you may later wish to rely
upon to claim an award.'' We believe that this proposed language will
adequately alert individuals who intend to claim an award that they
must comply with the cross-referenced rules, especially proposed Rule
21F-9(a) and (b), which require the submission of information to the
Commission either on Form TCR or through www.sec.gov, accompanied by a
declaration sworn under penalty of perjury that the information
submitted is true and correct.\155\ In our experience to date in the
awards context, compliance with existing Rule 21F-9(a) has proven to be
beneficial for enabling the Commission to determine, in a precise and
reliable manner, which persons submitted which information on which
dates.
---------------------------------------------------------------------------

    \154\ We note that, under the Commission's existing rules, in
order to make an award in connection with a related action brought
by one of the regulatory or law-enforcement entities listed in Rule
21F-3(b)(1) (17 CFR 240.21F-3(b)(1)), we must determine that the
same original information that the whistleblower gave to the
Commission also led to the successful enforcement of the related
action under the same criteria that govern awards made in connection
with Commission actions (see Rule 21F-3(b)(2), 17 CFR 240.21F-
3(b)(2)). This means that a whistleblower must comply with the other
procedures and conditions described in Rules 21F-4 and 21F-8 (17
CFR. 240.21F-4 and 240.21F-8) for a related action in the same
manner and to the same degree as is required for the Commission
action to which the other entity's action is related. For example,
under Rule 21F-4(c) (17 CFR 240.21F-4(c)) the whistleblower must
provide the same original information that he or she provided to the
Commission directly to the other regulatory or law-enforcement
entity and that the information the whistleblower gave to the other
entity must lead to successful enforcement of that entity's action
using the same criteria described in Rule 21F-4(c)(1)-(3) (17 CFR
240.21F-4(c)(1)-(3)) for Commission enforcement actions. However, we
are proposing to modify this requirement through our amendments to
Exchange Act Rule 21F-3 (17 CFR 24.21F-3) to also permit an award in
situations where the Commission itself shares the whistleblower's
information with the other agency.
    \155\ We believe that additional express authority in this
regard is conferred by Section 21F(c)(2)(D) of the Exchange Act. See
15 U.S.C. 78u-6(c)(2)(D) (``No award under subsection (b) shall be
made . . . to any whistleblower who fails to submit information to
the Commission in such form as the Commission may, by rule,
require.'').
---------------------------------------------------------------------------

    Proposed Rule 21F-2(c) would specify that, to qualify for
confidentiality protections afforded by Section 21F(h)(2) of the
Exchange Act \156\ 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.\157\ We believe it is
appropriate to adopt this provision both to codify the current practice
of the Commission's staff and to clarify for future whistleblowers the
conditions for receiving confidentiality protections. Further,
requiring whistleblowers to adhere to the procedures specified in Rule
21F-9(a) helps the staff to appreciate quickly and clearly which
whistleblowers are seeking the heightened confidentiality protections
provided by Section 21F(h)(2) of the Exchange Act when, among other
things, sharing the whistleblowers' information with other governmental
agencies.\158\
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    \156\ 15 U.S.C. 78u-6(h)(2).
    \157\ 17 CFR 240.21F-9(a).
    \158\ We are proposing to make a conforming amendment to
Exchange Act Rule 21F-7(a) (17 CFR 240.21F-7(a)) to acknowledge the
proposed requirement that a whistleblower must submit information
according to the procedures specified in Exchange Act Rule 21F-9(a)
(17 CFR 240.21F-9(a)) in order to qualify for the heightened
confidentiality protections provided for in Exchange Act 21F(h)(2),
15 U.S.C. 78u-(h)(2).

---------------------------------------------------------------------------

    Proposed Rule 21F-2(d) would revise existing Rule 21F-2(b) to
define the scope of anti-retaliation protections in a way that mirrors
the Supreme Court's authoritative reading of Section 21F. As the Court
explained in Digital Realty, the whistleblower definition in Section
21F(a)(6) ``first describes who is eligible for protection--namely, a
whistleblower who provides pertinent information `to the Commission,'
'' \159\ while ``[t]he three clauses of [Section 21F(h)(1)(A)] then
describe what conduct, when engaged in by a whistleblower, is shielded
from employment discrimination.'' \160\ Consistent with that reading,
proposed Rule 21F-2(d) would explain both who is eligible for
protection as a whistleblower and also what conduct by such a person is
protected from employment retaliation, by requiring a person to satisfy
several criteria listed in paragraph (d)(1).
---------------------------------------------------------------------------

    \159\ 138 S. Ct. at 777 (quoting Section 21F(a)(6), 15 U.S.C.
78u-6(a)(6)).
    \160\ Id. (citing Section 21F(h)(1)(A)(i)-(iii), 15 U.S.C. 78u-
6(h)(1)(A)(i)-(iii)).
---------------------------------------------------------------------------

    In explaining who is eligible for employment retaliation
protection, proposed Rule 21F-2(d)(1)(i) would first require that a
person ``qualify as a whistleblower under subsection (a) before
experiencing the retaliation'' for which redress is sought. We believe
that this proposed rule implements the most natural reading of Section
21F(h)(1)(A), which prohibits retaliation ``against[ ] a
whistleblower'' (emphasis added) \161\ and also follows from the
Supreme Court's focus in Digital Realty on whether the plaintiff had
reported to the Commission before the alleged retaliation.\162\ In
addition, proposed Rule 21F-2(d)(1)(ii) would carry forward the
requirement in existing Rule 21F-2(b)(1)(i) \163\ that the person
``reasonably believe'' that the information provided relates to a
possible securities law violation.
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    \161\ 15 U.S.C. 78u-6(h)(1)(A).
    \162\ See 138 S. Ct. at 778 (``Somers did not provide
information `to the Commission' before his termination, Sec.  78u-
6(a)(6), so he did not qualify as a `whistleblower' at the time of
the alleged retaliation. He is therefore ineligible to seek relief
under Sec.  78u-6(h).'').
    \163\ 17 CFR 240.21F-2(b)(1)(i).
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    In explaining what conduct is protected from retaliation, Rule 21F-
2(d)(1)(iii) requires that a person must perform a ``lawful act'' that
both is performed in connection with any of the activities described in
Section 21F(h)(1)(A)(i)-(iii) \164\ and ``relate[s] to the subject
matter of'' the person's submission to the Commission under proposed
Rule 21F-2(a).\165\ We believe that extending protection to all such
lawful acts is most consistent with the text of Section 21F(h)(1)(A),
which prohibits retaliation not simply for the activities described in
Section 21F(h)(1)(A)(i)-(iii) but for ``any lawful act done by the
whistleblower'' in performing those activities. Given the breadth of
Congress's language, we preliminarily anticipate that anti-retaliation
protection under proposed Rule 21F-2(d)(1)(iii) will properly encompass
actions that are preparatory to the conduct described in Section
21F(h)(1)(A)(i)-(iii), such as printing and completing a Form TCR and
depositing the completed form in a mailbox. We also preliminarily
anticipate that protected conduct under proposed Rule 21F-2(d)(1)(iii)
will not be limited strictly to reports to the Commission, since that
limitation would render clauses (ii) and (iii) of Section 21F(h)(1)(A)
superfluous, given clause (i)'s express coverage of Commission
reports.\166\
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    \164\ 15 U.S.C. 78u-6(h)(1)(A)(i)-(iii).
    \165\ We are not proposing to define the term ``lawful act''
under Section 21F(h)(1)(A) or otherwise to offer guidance as to its
meaning. We note that the term does appear in a number of federal
employment anti-retaliation statutes, but it does not appear that
any of these statutes define the term. See, e.g., Marcella
Auerbachian and Michael W. Paddock, Legal Ethics: Lines in the
Sand--The Intersection of Bringing and Defending a Qui Tam False
Claims Act Case, 20141006 AHLA Seminar Papers 19 (Oct. 6, 2014)
(available on Westlaw) (``The FCA does not define `lawful acts' '').
    \166\ We are aware of one circuit decision suggesting in dicta,
before the Digital Realty decision, that anti-retaliation protection
under Section 21F(h)(1) should be limited exclusively to reports to
the Commission. See Martensen v. Chicago Stock Exch., 882 F.3d 744,
746 (7th Cir. 2018). We preliminarily believe that, in this respect,
Martensen is inconsistent with the Supreme Court's subsequent
decision in Digital Realty. See 138 S. Ct. at 779 (``With the
statutory definition incorporated, clause (iii) protects a
whistleblower who reports misconduct both to the SEC and to another
entity, but suffers retaliation because of the latter, non-SEC,
disclosure.'').
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    At the same time, proposed Rule 21F-2(d)(1)(iii) would limit anti-
retaliation protection to lawful acts that ``relate to the subject
matter'' of the person's submission to the Commission under proposed
Rule 21F-2(a). Given the silence of Section 21F and the Supreme Court's
reluctance to address whether any subject-matter connection should be
required,\167\ we believe it appropriate to clarify that, to receive
protection, a lawful act must relate to the subject matter of the
submission to the Commission.\168\
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    \167\ See Digital Realty, 138 S. Ct. at 780-81.
    \168\ We preliminarily believe that this clarification helps
avoid the incongruous result that a person could qualify just once
as a whistleblower and then receive lifetime protection for any non-
Commission reports described in clause (iii) with respect to
distinct securities law violations that occur years later. Given the
Supreme Court's instruction that Congress's core objective was to
encourage reports to the Commission, 138 S. Ct. at 777, it makes
more sense that such a person needs to return to the Commission to
report the later violations in order to receive protection.
---------------------------------------------------------------------------

    Proposed Rule 21F-2(d)(2) would address a timing issue under
Section 21F's anti-retaliation provisions by clarifying that a person
does not need to qualify as a whistleblower under Rule 21F-2(a) before
performing the lawful act described in Rule 21F-2(d)(1)(iii), in order
to be eligible for anti-retaliation protection. In other words, whether
conduct is protected from retaliation would not depend on whether the
person performing that conduct reported to the Commission beforehand or
afterward (in order to qualify as a whistleblower). Section 21F is
silent on this issue, and we believe that this clarification will help
maintain appropriate incentives for persons to make the internal
reports described in Section 21F(h)(1)(A)(iii) before or at the same
time as reporting to the Commission. Proposed Rule 21F-2(d)(2) would
reiterate, however, that a person must qualify as a whistleblower under
proposed Rule 21F-2(a) before experiencing retaliation. Thus, for
example, an individual who experiences repeated retaliation for a prior
lawful act, and who first reports to the Commission while the
retaliation is still ongoing, would be protected with respect to any
retaliation experienced after the Commission report but not for any
retaliation experienced before the Commission report.
    Proposed Rule 21F-2(d)(3) would carry forward existing Rule 21F-
2(b)(1)(iii) \169\ without substantive change. That provision states
that the anti-retaliation protections apply regardless of whether a
person satisfies the procedures and conditions to qualify for an award
described in Rules 21F-4, 21F-8, and 21F-9 (such as, for example,
submitting the information to the Commission using the electronic TCR
portal on whe Commission's website or completing the required
declaration as to the accuracy of the information submitted in the
whislteblower's tip).
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    \169\ 17 CFR 240.21F-2(b)(1)(iii).
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    Proposed Rule 21F-2(d)(4) would carry forward existing Rule 21F-
2(b)(2) \170\ without substantive change. That provision states that
the retaliation prohibition in Section 21F(h)(1) \171\ and the rules
thereunder shall be enforceable in an action or proceeding brought by
the Commission.
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    \170\ 17 CFR 240.21F-2(b)(2).
    \171\ 15 U.S.C. 78u-6(h)(1).
---------------------------------------------------------------------------

    To illustrate how we anticipate proposed Rule 21F-2 would operate
in practice, consider the following hypothetical scenario: An employee
at a

publicly traded issuer overhears a conversation by colleagues
discussing a scheme to create an artificial boost for reported sales.
The employee investigates and discovers that sales invoices are being
generated without any corresponding movement of inventory, and then
reports the possible misconduct to the issuer's chief compliance
officer. But a week passes without any action being taken on the
report. If the Commission then receives an email from that employee in
which the employee reports the same possible misconduct, and in sending
the email the employee reasonably believed that the report relates to a
possible securities laws violation, then the employee would qualify as
a whistleblower under Rule 21F-2(a) and would be eligible for anti-
retaliation protections under Rule 21F-2(d)(1)(i)-(ii) as of the time
the employee provides the information to the Commission. Assuming that
the employee's internal report was within the scope Section 806(a) of
Sarbanes-Oxley, that internal report itself would be a protected
``lawful act'' under Rule 21F-2(d)(1)(iii). The fact that the employee
made the internal report before the Commission report would not make a
difference for anti-retaliation protections under Rule 21F-2(d)(2).
That said, if the employee wanted to be eligible for an award under
Rule 21F-2(b) and to qualify for confidentiality protections under Rule
21F-2(c), he or she would need to make his or her first report of that
information to the Commission using Form TCR or through the online
portal at www.sec.gov, as required by Rule 21F-9(a), and not through an
email to the Commission. To qualify for an award, the employee would
additionally need to comply with the procedures and the conditions
described in Rules 21F-4, 21F-8, and 21F-9.
Request for Comment
    20. Is it reasonable to require that an individual provide
information to the Commission ``in writing'' to qualify as a
whistleblower? Is this approach either too restrictive or too broad?
Are there situations in which only some other form of communication
would be possible or preferred? Please explain.
    21. Should our whistleblower rules enumerate any other ``manner''
of providing information to the Commission for purposes of anti-
retaliation protection? For example, should our rules enumerate
testifying under oath in an investigation or judicial or administrative
action of the Commission as an additional ``manner'' of providing
information to the Commission? \172\
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    \172\ See Digital Realty, 138 S. Ct. at 781 (``Nothing in
today's opinion prevents the agency from enumerating additional
means of SEC reporting--including through testimony protected by
clause (ii)'' of Section 21F(h)(1)(A).).
---------------------------------------------------------------------------

    22. Does the proposed rule reasonably require that the lawful acts
done by the whistleblower must relate to the subject matter of the
whistleblower's submission to the Commission in order for the
employment retaliation protections to apply? Should a different
standard apply? Why or why not?
    23. Does the proposed rule appropriately address the timing of an
individual's report to the Commission relative to the protected conduct
and to any retaliation?
    24. In determining the amount of an award, the Commission considers
participation in internal compliance systems. Given the change in anti-
retaliation protections, should the Commission still use this criteria
in determining the size of whistleblower awards? Why or why not?
    25. Would it be necessary or appropriate to specify additional
types of misconduct that fall within the prohibition in Section
21F(h)(1)(A) against ``any other manner [of] discriminat[ion] against[
] a whistleblower''? For example, should our rules clarify that if an
employer rejects a prospective employee, or a past employer attempts to
cause such rejection, because that individual had engaged in activity
protected under Rule 21F-2, this would be a form of retaliation covered
by Section 21F(h)(1)(A)? \173\
---------------------------------------------------------------------------

    \173\ The Supreme Court has held that a former employer's
retaliatory negative reference was actionable under Title VII. See,
e.g., Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997). Other
federal anti-retaliation statutes have been held to cover such
conduct, which is often referred to as ``blacklisting.'' See Black's
Law Dictionary (10th ed. 2014) (defining ``blacklist'' as ``[t]o put
the name of (a person) on a list of those who are disfavored and are
therefore to be avoided or punished,'' and giving as an example,
``the firm blacklisted the former employee''). The Department of
Labor's regulations implementing Section 806 of the Sarbanes-Oxley
Act of 2002 expressly prohibit ``blacklisting'' of an employee, 29
CFR 1980.102(a), and define an ``employee'' as ``an individual
presently or formerly working for a covered person, an individual
applying to work for a covered person, or an individual whose
employment could be affected by a covered person.'' Id. Sec.
1980.101(g). In relevant part, Section 806 of the Sarbanes-Oxley Act
is similar to Section 21F(h), providing that no covered entity or
person may discharge, demote, suspend, threaten, harass, or in any
other manner discriminate against an employee in the terms and
conditions of employment, and, under Section 21F(h)(1)(A), that no
employer may discharge, demote, suspend, threaten, harass, directly
or indirectly, or in any other manner discriminate against, a
whistleblower in the terms and conditions of employment.
    Both statutes broadly prohibit ``any . . . manner'' of
discrimination in the terms or conditions of employment. See also
Wanamaker v. Columbian Rope Co., 108 F.3d 462, 466 (2d Cir. 1997)
(noting that former employees can state a claim for retaliation
under the Age Discrimination in Employment Act for
``blacklist[ing]''); Boscarello v. Audio Video Sys., Inc., 784 F.
Supp. 2d 577, 582 (E.D. Va. 2011) (former contractor stated a
retaliation claim under the Fair Labor Standards Act against former
employer by alleging blacklisting).
---------------------------------------------------------------------------

F. Proposed Amendment to Rule 21F-8 To Add New Paragraph (d) To Provide
the Commission With Additional Flexibility Regarding the Forms Used in
Connection With the Whistleblower Program (and Corresponding Amendments
to Rule 21F-10, Rule 21F-11, and Rule 21F-12) \174\
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    \174\ The Commission anticipates that proposed Rule 21F-8(d)(1),
if adopted, would apply only in connection with submissions of
information that are made by an individual after the effective date
of the proposed rules. Further, the Commission preliminarily
anticipates that proposed Rule 21F-8(d)(2), if adopted, would apply
only to covered-action and related-action award applications that
are connected to a Notice of Covered Action (see Exchange Act Rule
21F-10(a), 17 CFR 240.21F-10(a)) posted on or after effective date
of the final rules.
---------------------------------------------------------------------------

    Currently an applicant seeking to submit information to the
Commission in order to qualify as a whistleblower (for purposes of the
award and confidentiality components of the whistleblower program) must
submit this information by using one of two methods: (1) By providing
the information through an online portal on the Commission's website,
or (2) by submitting the paper Form TCR that was adopted by the
Commission as part of the original whistleblower rulemaking in
2011.\175\ Periodically the Commission has determined that it would be
beneficial to modify the online portal. However, this has resulted in
discrepancies forming over time between the information collected
through the online portal and that elicited by Form TCR.
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    \175\ See Exchange Act Rule 21F-9(a), 17 CFR 240-21F-9(a). Under
the proposed amendments to Exchange Act Rule 21F-2, 17 CFR 240.21F-
2, these procedures will remain necessary in order for a
whistleblower to be eligible for an award and to obtain the
confidentiality protections afforded by Exchange Act Section
21F(h)(2), 15 U.S.C. 78u-6(h)(2), even though an individual's status
as a ``whistleblower'' would no longer turn on compliance with these
procedures.
---------------------------------------------------------------------------

    To provide the Commission with the ability to make timely
corresponding adjustments to the Form TCR when the Commission
determines to modify the online portal, the Commission proposes to
modify Exchange Act Rule 21F-8 \176\ by adding a new paragraph (d)(1)
providing that the Commission will periodically designate on the
Commission's web page a Form TCR

(Tip, Complaint, or Referral) that individuals seeking to be eligible
for an award through the process identified in Sec.  240.21F-9(a)(2)
shall use.
---------------------------------------------------------------------------

    \176\ 17 CFR 240.21F-8.
---------------------------------------------------------------------------

    In addition to the paper Form TCR, the Commission also adopted a
paper Form WB-APP when it adopted the existing rules for the
whistleblower program. Individuals seeking awards must make their award
request using Form WB-APP. Like Form TCR, Form WB-APP can only be
modified by amending the Code of Federal Regulations. However, we
believe that it may be beneficial to provide the Commission with
greater administrative flexibility to modify the form. Providing the
Commission with the ability to modify the form's informational
requirements in a timely fashion should also help promote the program's
overall efficiency. Accordingly, the Commission proposes to modify
Exchange Act Rule 21F-8 by adding a new paragraph (d)(2) providing the
Commission will also periodically designate on the Commission's web
page a Form WB-APP for use by individuals seeking to apply for an award
in connection with a Commission covered judicial or administrative
action (15 U.S.C. 21F(a)(1)), or a related action (Sec.  240.21F-
3(b)(1) of the chapter).
    In proposing this additional flexibility, we note that both Form
TCR and Form WB-APP elicit information used by the Commission to
administer its whistleblower award program and are not public
disclosure documents. Moreover, we anticipate that the forms designated
on the Commission's website for use in the whistleblower program would
be substantially similar to those currently referenced in the Code of
Federal Regulations.
    In accordance with the changes discussed above, the following
corresponding amendments would be made. First, the Form TCR \177\ that
the Commission adopted when it promulgated its whistleblower rules in
2011 would be repealed and the parenthetical Code of Federal Regulation
citations to that form in Exchange Act Rule 21F-9(c) \178\ and Rule
21F-12(a)(2) \179\ would be removed. Second, the existing Form WB-APP
currently referenced in the Code of Federal Regulations would be
repealed and Rule 21F-10,\180\ Rule 21F-11,\181\ and Rule 21F-12 \182\
would be amended by removing the parenthetical references found
throughout those rules to the Code of Federal Regulation citation to
the current Form WB-APP.
---------------------------------------------------------------------------

    \177\ 17 CFR 249.1800.
    \178\ 17 CFR 21F-9(c).
    \179\ 17 CFR 21F-12(a)(2).
    \180\ 17 CFR 21F-10.
    \181\ 17 CFR 21F-11.
    \182\ 17 CFR 21F-12.
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Request for Comment
    26. Are there any additional considerations or limitations that the
Commission should consider in connection with the proposed rule change?
For example, should we provide that any revisions to paper Form TCR or
Form WB-APP shall not take effect for a 30-day period after posting on
the Commission website?

G. Proposed Amendment to Rule 21F-8 To Add New Paragraph (e) To Clarify
and Enhance the Commission's Authority To Address Claimants Who Submit
False Information to the Commission or Who Abuse the Award Application
Process \183\
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    \183\ The Commission anticipates these proposed rule changes
would apply only to whistleblower submissions that are made after
the effective date of the proposed rules.
---------------------------------------------------------------------------

    In our experience implementing the whistleblower award program to
date, a small number of claimants have imposed an undue burden on the
award determination process by submitting dozens and in some cases over
a hundred award applications that lack any colorable connection between
the tip that they provided and the Commission enforcement actions for
which they are seeking awards. Processing these frivolous award
applications uses staff resources that could otherwise be devoted to
potentially meritorious award applications. Beyond the diversion of
staff resources, we have found that, by utilizing the procedural
opportunities to object to an award, these repeat applicants can
significantly delay the processing of meritorious award applications
and the eventual payment of awards.
    To prevent these repeat submitters from continuing to abuse the
award application process to the detriment of potentially meritorious
applicants, we believe that it would be appropriate to adopt a rule
that would permit the Commission to permanently bar any applicant from
seeking an award after the Commission determines that the applicant has
abused the process by submitting three frivolous award
applications.\184\ Specifically, under our proposal, if an applicant
submits three or more award applications for Commission actions that
the Commission finds to be frivolous or lacking a colorable connection
between the tip (or tips) and the Commission action, the Commission may
permanently bar the applicant from submitting any additional award
applications (either for Commission actions or related actions) and the
Commission would not consider any other award applications that the
claimant has submitted or may seek to submit in the future.\185\
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    \184\ We are relying on our broad rulemaking authority to
propose the amendments in this section. As noted earlier, 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, and has long been
understood to provide the Commission with broad authority to issue
rules and regulations carrying the force of law.
    \185\ Under the proposed rule, the Commission would not consider
any applications made for related actions in assessing whether an
applicant has submitted three or more award applications that are
frivolous or lack any colorable connection between the tip and the
enforcement action. The Commission would assess only applications
submitted for Commission actions.
---------------------------------------------------------------------------

    The proposed rule would expressly provide, however, that the Office
of the Whistleblower shall as an initial matter (i.e., before any
preliminary determination or preliminary summary disposition would be
issued) advise any claimant of the Office's assessment that the
claimant's award application for a Commission action is frivolous or
lacking a colorable connection between the tip and the action for which
the individual has sought an award. If the applicant withdraws the
application at that time, it would not be considered by the Commission
in determining whether to exercise its authority to impose a bar for
three or more frivolous applications or applications lacking a
colorable connection between the tip and the Commission action for
which the award was sought.
    In addition, the proposed rule would codify the Commission's
current practice with respect to applicants who violate Rule 21F-
8(c)(7).\186\ That rule provides that an applicant shall be ineligible
for an award if, in the whistleblower's submission, his or her other
dealings with the Commission, or his or her dealings with another
authority in connection with a related action, he or she knowingly and
willfully make any false, fictitious, or fraudulent statement or
representation, or use any false writing or document knowing that it
contains any false, fictitious, or fraudulent statement or entry with
intent to mislead or otherwise hinder the Commission or

another authority.\187\ The Commission has issued two final orders that
have permanently barred the applicants from submitting any further
whistleblower award applications based on violations of Rule 21F-
8(c)(7). The proposed rule would clarify and codify the Commission's
authority to bar applicants by providing that if the Commission finds
that a claimant has violated paragraph (c)(7) of Rule 21F-8, the
Commission may permanently bar the applicant from making any future
award applications, and shall decline to process any other award
applications that the claimant has already submitted.
---------------------------------------------------------------------------

    \186\ 17 CFR 240.21F-8(c)(7).
    \187\ See Exchange Act section 21F(i), 15 U.S.C. 78u-6(i).
---------------------------------------------------------------------------

    In our view, it is appropriate to assess whether an applicant who
engages in egregious behavior vis-[agrave]-vis the Commission in
violation of Rule 21F-8(c)(7) should be permanently ineligible from
obtaining an award. Such egregious conduct can result in the
unnecessary and wasteful diversion of staff resources and in extreme
cases it may expose investors and the public to potential harm
(particularly where the misconduct concerns ongoing Commission law-
enforcement actions).\188\ Moreover, we believe that this proposed rule
could discourage individuals from engaging in the egregious conduct
prohibited by Rule 21F-8(c)(7), particularly when they are submitting
their award applications, because they should recognize that it may not
only lead to a denial of their current award claim but may also
permanently disqualify them from obtaining a whistleblower award.
---------------------------------------------------------------------------

    \188\ Importantly, the proposed rule would apply to false,
fictitious, or fraudulent representations, statements, or documents
beyond those made in connection with an award determination. For
example, if the Commission finds that an individual knowingly or
willfully made a false representation in testimony to the Commission
in one matter, the Commission could bar that individual in
connection with a whistleblower award submitted by that individual
for an entirely separate matter. In this way, we believe that the
proposed rule would provide an important additional incentive for
individuals to behave truthfully and honestly with the Commission in
all aspects of their dealings with the agency.
---------------------------------------------------------------------------

    Under the proposed rule, the Commission would consider a permanent
bar in the context of processing an award application. We expect that
the preliminary determination or preliminary disposition addressing the
award application would include a recommendation that the applicant be
permanently barred; this should serve to place the applicant on notice
that a bar is being considered and afford the applicant an opportunity
to advance any arguments in connection with a potential bar before the
Commission issues a final order.\189\
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    \189\ We do not intend to foreclose the potential that the
Commission could impose such a bar in the context of a formal
adjudicatory proceeding to which the individual was a respondent if
the Enforcement Division made such a request and the parties
litigated it before the Commission.
---------------------------------------------------------------------------

Request for Comment
    27. Is it appropriate for OWB to advise a claimant of the Office's
assessment that the claimant's award application for a Commission
action is frivolous, and to offer the claimant the opportunity to
withdrawal his or her award application(s), such that the
application(s) would not be considered by the Commission in determining
whether to impose a bar?
    28. Is it appropriate for the Commission to adopt a rule that would
permanently bar any applicant after he or she has been found by either
the Commission to have submitted at least three frivolous award
applications? Should the number of frivolous award applications be
fewer or greater before a bar would be imposed?
    29. Are there any additional procedures, considerations, or
limitations that the Commission should consider in connection with the
proposed rule change?

H. Proposed Amendments to Rule 21F-9 To Provide Additional Flexibility
and Clarity Regarding Form TCR (and Corresponding Technical Amendments
to Rule 21F-10, Rule 21F-11, and Rule 21F-12) \190\
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    \190\ The Commission anticipates these proposed rule changes, if
adopted, would apply only in connection with submissions of
information that are made by an individual to qualify as a
whistleblower after the effective date of the proposed rules.
---------------------------------------------------------------------------

    As noted above, Exchange Act Rule 21F-9(a) \191\ currently provides
that to qualify as a whistleblower an individual may submit information
about a possible securities law violation by one of two methods: ``(1)
Online, through the Commission's website located at www.sec.gov,'' or
``(2) [b]y mailing or faxing a Form TCR (Tip, Complaint or Referral)
(17 CFR 249.1800) to the SEC Office of the Whistleblower, 100 F Street
NE, Washington, DC 20549-5631, Fax<PHONE_NUMBER>.'' We propose to
amend this rule to conform to the proposed amendments to Exchange Act
Rule 21F-2 and to clarify that online submissions must be made through
the Commission's online TCR portal. Similarly, we propose to revise the
rule text to provide the Commission additional discretion in
designating where paper Form TCRs may be sent and how whistleblowers
may submit information to the Commission to qualify for an award or
confidentiality protections.
---------------------------------------------------------------------------

    \191\ 17 CFR 240.21F-9(a).
---------------------------------------------------------------------------

    The revised language in Rule 21F-9(a) would provide that to submit
information in a manner that satisfies Sec.  240.21F-2(b) and (c) of
the chapter, an individual must submit his or her information to the
Commission by either of these methods: (1) Online, through the
Commission's website located at www.sec.gov, using the Commission's
electronic TCR portal (Tip, Complaint or Referral); (2) by mailing or
faxing a Form TCR to the SEC Office of the Whistleblower at the mailing
address or fax number identified on the SEC's web page for making such
submissions; or (3) by any other such method that the Commission may
expressly designate on its website as a mechanism that satisfies Sec.
240.21F-2(b) and (c).\192\ We believe that the clarifications and
flexibility afforded by the proposed revisions should help to make the
whistleblower program more user-friendly for potential
whistleblowers.\193\ New paragraph (b)(3) would, among other things,
afford the Commission discretion to identify alternative mechanisms for
submitting information in instances where, for example, the
Commission's on-line portal may be unavailable due to a maintenance or
replacement.\194\
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    \192\ For purposes of the Exchange Act Rule 21F-12(a)(2), which
provides that a ``whistleblower's Form TCR'' may be included within
the administrative record upon which the Commission relies in
considering a whistleblower award application, the reference to Form
TCR in this rule refers to both the online submission made through
the Commission's electronic TCR portal and the paper Form TCR.
    \193\ The changes that we are proposing to Exchange Act Rule
21F-2, 17 CFR 240.21F-2--specifically the unified definition of
``whistleblower'' that would apply in the award, employment anti-
retaliation, and confidentiality contexts--as well as the amendments
that we are proposing to Exchange Act Rule 9(a), 17 CFR 240.21F-
9(a), would render inapplicable on a going-forward basis the formal
interpretation that the Commission issued in 2015 regarding the
meaning of Exchange Act Rule 21F-9. See 80 FR 47829, 47830/1, 2015
WL 4710732 (Aug. 10, 2015) (``Rule 21F-9(a) . . . specif[ies] the
reporting procedures that must be followed by an individual who
seeks to qualify as a whistleblower under Rule 21F-2(a). . . .'').
    \194\ We are making a conforming amendment to Exchange Act Rule
21F-9(b), 17 CFR 240-21F-9(b), to make clear that if a whistleblower
provides information pursuant to a method permited by proposed
section 9(b)(3), the whistleblower must also complete the
declaration required by Exchange Act Rule 21F-9(b).
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    We are also proposing to add new paragraph (e) to Exchange Act Rule
21F-9 to clarify that the first time an individual provides information
to the Commission that the individual will rely upon as a basis for
claiming an award, the individual must provide that

information in accordance with the procedures specified in Rules 21F-
9(a) and (b). If an individual fails to do so, the individual will--
subject to the limited exception discussed below--be barred from
subsequently resubmitting the same information to the Commission in
accordance with Rules 21F-9(a) and (b) and seeking to obtain an award
based on that information, even if the individual has previously
qualified as a whistleblower under the proposed amendment to Rule 21F-
2(a) by submitting the information in some other written form.\195\ To
date, this has been the approach that the Commission has followed in
making award determinations.\196\ We believe that the proposed rule
language would provide additional clarity to potential whistleblowers
to further alert them to the importance of following the procedures
specified in Rules 21F-9(a) and (b).\197\ In proposing this amendment,
we observe that compliance with the procedures in Rules 21F-9(a) and
(b) advances many programmatic purposes. These include allowing the
Commission to promptly determine whether an individual who submits
information is subject to heightened whistleblower confidentiality
protections; helping the staff efficiently process the information and
other documentation provided by the individual and assess its potential
credibility; and assisting the Commission in eventually evaluating the
individual's potential entitlement to an award.
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    \195\ To illustrate the intersection of proposed amended Rule
21F-2(a) and proposed Rule 21F-9(e): An individual who provides the
Commission with information about a possible violation of the
federal securities laws in writing will qualify as a whistleblower
and obtain the retaliation protections provided under Section
21F(h)(1) of the Exchange Act, 15 U.S.C. 78u-6(h)(1). However, to be
eligible for an award as to that information, the individual must
make the initial submission of that information in accordance with
the procedures set forth in Rules 21F-9(a) and (b); i.e., the
individual must submit the information on Form TCR or through the
Commission's online TCR portal and must execute the required
declaration. The individual may remain award-eligible for any new
information that is submitted in accordance with the Rule 21F-9
procedures, but not for the information that was previously
submitted without following those procedures.
    \196\ In a few instances, the Commission has allowed individuals
to perfect a defective submission provided that the individual did
so promptly and before any significant investigative steps had
occurred with respect to the submission. Any opportunity to perfect
a defective submission would, under the proposed rule, be governed
by the limited exception provided therein (which is generally
consistent with the opportunities the Commission has to date
provided in allowing individuals to perfect their submissions).
    \197\ If the proposed amendments in this release are adopted,
Exchange Act 21F-9(a) would be revised to provide that to submit
information in a manner that satisfies Sec.  240.21F-2(b) and (c) of
the chapter an individual must submit his or her information to the
Commission by any of these methods: (1) Online, through the
Commission's website located at www.sec.gov, using the Commission's
electronic TCR portal (Tip, Complaint or Referral); (2) Mailing or
faxing a Form TCR to the SEC Office of the Whistleblower at the
mailing address or fax number designated on the SEC's web page for
making such submissions; or (3) By any other such method that the
Commission may expressly designate on its website as a mechanism
that satisfies Sec.  240.21F-2(b) and (c). Based on the proposed
modifications to Exchange Act Rule 21F-9(b), it would provide that,
further, to be eligible for an award, the individual must declare
under penalty of perjury at the time he or she submits the
information pursuant to paragraph (a)(1), (2), or (3) of the section
that the information is true and correct to the best of his or her
knowledge and belief.
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    Proposed paragraph (e) would also incorporate a limited exception
that would permit the Commission, in its sole discretion, to make an
award to a whistleblower who failed to comply with the procedural
requirements of Rules 21F-9(a) and (b) when the individual first
provided information to the Commission. The limited exception permitted
by paragraph (e) would provide that notwithstanding the foregoing, the
Commission, in its sole discretion, may waive an individual's non-
compliance with paragraphs (a) and (b) of Rule 21F-9 if the Commission
determines that the administrative record clearly and convincingly
demonstrates that the individual would otherwise qualify for an award
and the individual demonstrates that he or she complied with the
requirements of paragraphs (a) and (b) within 30 days of the first
communication with the staff about the information that the individual
provided.\198\ There may be some situations where an individual will
have provided information to the Commission about a potential
securities law violation but may have failed to perfect his or her
submission in accordance with the procedures required to be a
whistleblower eligible for an award. For example, an individual may
learn about a potential securities law violation that is about to occur
and may telephonically inform the staff in an effort to permit the
Commission to take action before the violation occurs. Similarly, the
Office of the Whistleblower periodically receives letters from
individuals seeking to report securities law violations and the Office
will generally provide deficiency notices to these individuals to the
extent that it appears that these individuals want to become
whistleblowers eligible for an award.\199\ We believe that, to the
extent that the information that any such individual might provide
could be the basis for the Commission bringing a successful enforcement
action, the Commission should have within its discretion the ability to
make an award provided that the individual complies with Rules 21F-9(a)
and (b) within 30 days of receiving a deficiency letter (or having any
other communication with the staff concerning the information that the
individual provided).\200\
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    \198\ By requiring that the Commission must find that the
administrative record ``clearly and convincingly'' demonstrates that
the individual would (but for the untimely compliance with the
requirements of Exchange Act Rules 21F-9(a) and (b)) qualify for an
award, we mean to make this discretionary mechanism available only
in those cases where there can be no serious doubt about the
individual's contribution to the successful action and the
individual's compliance with the award criteria and eligibility
conditions. Otherwise, in determining whether to employ its
discretion, the Commission would have to potentially expend
considerable staff time and effort carefully developing an
administrative record and analyzing whether the applicant would have
been a meritorious whistleblower, and only then turn to decide
whether to exercise its discretion to waive what is otherwise a
threshold procedural requirement.
    \199\ Individuals do not have an entitlement to a deficiency
letter and their failure to receive one will not be deemed a basis
to excuse their failure to comply with the terms of Exchange Act
Rule 21F-2. It is each individual's own responsibility to comply
with the requirements of the Commission's rules with respect to
submitting information to qualify for an award.
    \200\ We believe that using a 30-day time period is sufficient
here. We note that in connection with judicial proceedings 30-day
filing deadlines are not uncommon--indeed, Congress itself provided
only a 30-day window for unsuccessful whistleblowers to challenge a
Commission final order denying their award application, see Exchange
Act section 21F(f), 15 U.S.C. 78u-6(f)--and that our proposed Rule
21F-18, discussed infra, affords a 30-day time period for applicants
to respond to preliminary summary dispositions that would be issued
under that proposed rule.
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Request for Comment
    30. Does proposed Rule 21F-9(a) provide additional clarity and
flexibility that may help make the submission of information by
potential whistleblowers more user-friendly? Are there any additional
factors that the Commission should assess in connection with the
proposed rule amendments?
    31. Please comment on the limited exception provided for in
proposed Rule 9(e) appropriate. Should the exception be adopted? If so,
should it be narrowed or broadened? Should the 30-day time period be
extended or reduced?

I. Proposed Amendment to Rule 21F-12 Regarding the Materials That May
Form the Basis of the Commission's Award Determination \201\
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    \201\ The Commission anticipates this proposed rule change, if
adopted, would apply only to covered-action and related-action award
applications that are connected to a Notice of Covered Action (see
Exchange Act Rule 21F-10(a), 17 CFR 240.21F-10(a)) posted on or
after effective date of the final rules.
---------------------------------------------------------------------------

    Rule 21F-12 \202\ lists the materials that the Commission and the
Claims Review Staff (``CRS'') may rely upon to make a whistleblower
award determination. We are proposing to make two clarifying amendments
to that rule.
---------------------------------------------------------------------------

    \202\ 17 CFR 240.21F-12.
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    First, Rule 21F-12(a)(3) \203\ currently permits the Commission and
the CRS to rely upon the whistleblower's Form WB-APP, including
attachments, and ``any other filings or submissions from the
whistleblower in support of the award application.'' Based on this
provision's silence as to the timeliness of such ``other filings or
submissions,'' some whistleblower award claimants have submitted
hundreds of pages of supplemental information on an ongoing basis even
after expiration of the respective time periods for responding to a
Notice of Covered Action or a Preliminary Determination, resulting in
significant administrative burdens on the Office of the Whistleblower
and potential delays to the whistleblower claims process. We believe
that expressly excluding untimely supplemental submissions from
consideration by the Commission and the CRS would incentivize
applicants to make thorough submissions in the first instance when
responding to the Notice of Covered Action and the CRS's Preliminary
Determination (or a Preliminary Summary Disposition issued by the
Office of the Whistleblower under Proposed Rule 21F-18, discussed
infra), which should reduce these administrative burdens and the
potential for delays to the claims process.
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    \203\ 17 CFR 240.21F-12(a)(3).
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    Accordingly, we propose amending Rule 21F-12(a)(3) to clarify that
the Commission and the CRS (and the Office of the Whistleblower when
processing a claim pursuant to proposed Rule 21F-18) may rely upon
materials timely submitted by the whistleblower in response either to
the Notice of Covered Action, to a request from the Office of the
Whistleblower or the Commission, or to the Preliminary Determination.
The deadline for filing a claim for a whistleblower award is ninety
(90) days after the relevant Notice of Covered Action under Rule 21F-
10(a) & (b) \204\ and Rule 21F-11(a) & (b).\205\ Consistent with Rule
21F-8(b),\206\ the Commission may specify a deadline when it requests
additional information from the whistleblower in support of an award
application. The time frame for responding to the Preliminary
Determination is expressly established by Rule 21F-10(e) \207\ and Rule
21F-11(e).\208\ Under our proposal, materials submitted outside those
respective time frames would not be considered absent extraordinary
circumstances excusing the delay.\209\
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    \204\ 17 CFR 240.21F-10(a) & (b).
    \205\ 17 CFR 240.21F-11(a) & (b).
    \206\ 17 CFR 240.21F-8(b).
    \207\ 17 CFR 240.21F-10(e).
    \208\ 17 CFR 240.21F-11(e).
    \209\ See Exchange Act Rule 21F-8(a), 17 CFR 240.21F-8(a).
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    Second, we propose amending Rule 21F-12(a)(6),\210\ which currently
provides in pertinent part that the Commission and the Claims Review
Staff in making an award determination may consider any ``documents or
materials including sworn declarations from third-parties that are
received or obtained by the Office of the Whistleblower to assist the
Commission resolve the claimant's award application, including
information related to the claimant's eligibility.'' We propose to
modify this provision to clarify that it applies only to materials
submitted by third parties, because some claimants have misinterpreted
it as also encompassing materials submitted by the claimants
themselves. Moreover, in light of the modification that we are
proposing to Rule 21F-12(a)(3) to require that a claimant make a
``timely'' submission in response to a Preliminary Determination, we
believe that it is important to clarify that Rule 21F-12(a)(6) does not
apply to information provided by whistleblowers.
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    \210\ 17 CFR 240.21F-12(a)(6).
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Request for Comment
    32. Does the proposed amendment as to timeliness provide an
appropriate safeguard against abusive supplemental filings by
whistleblower award claimants?
    33. Do the proposed amendments provide sufficient clarity? Is there
alternative language that might provide greater clarity about the
materials that the Commission and the CRS may rely upon in making an
award determination?

J. Proposed Amendment to Rule 21F-13 Regarding the Administrative
Record on Appeal \211\
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    \211\ The Commission anticipates this proposed rule change, if
adopted, would apply only to covered-action and related action award
applications that are connected to a Notice of Covered Action (see
Exchange Act Rule 21F-10(a), 17 CFR 240.21F-10(a)) posted on or
after effective date of the final rules.
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    Rule 21F-13 \212\ describes the availability of judicial review and
the record on appeal of a whistleblower award determination by the
Commission. Rule 21F-13(b) provides that the record on appeal will
consist of the Preliminary Determination (or a Preliminary Summary
Disposition issued under proposed Rule 21F-18, discussed infra), the
Final Order of the Commission, ``and any other items from those set
forth in Rule 21F-12(a) of this chapter that either the claimant or the
Commission identifies for inclusion in the record.'' \213\ That
provision thus ensures that the record on appeal will include the
materials described in Rule 21F-12(a) that were the basis for the
Commission's award determination.
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    \212\ 17 CFR 240.21F-13.
    \213\ 17 CFR 240.21F-13(b).
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    Some claimants have interpreted Rule 21F-13(b) as permitting them
to designate materials for inclusion in the record on appeal that
technically meet the descriptions in Rule 21F-12(a) but that were never
actually before the Commission in issuing the Final Order. However,
that interpretation creates significant tension with the basic
principle of administrative law that, on appeal, ``the court's review
is limited to the administrative record before the agency at the time
of its decision.'' \214\ That interpretation also would inappropriately
expand the record on appeal beyond the limits in Rule 16 of the Federal
Rules of Appellate Procedure.\215\
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    \214\ EarthReports, Inc. v. FERC, 828 F.3d 949, 959 (D.C. Cir.
2016).
    \215\ Rule 16(a) states,
    The record on review or enforcement of an agency order consists
of:
    (1) The order involved;
    (2) any findings or report on which it is based; and
    (3) the pleadings, evidence, and other parts of the proceedings
before the agency.
    Fed. R. App. P. 16(a)(1)-(3) (emphases added).
---------------------------------------------------------------------------

    As amended, Rule 21F-13(b) would eliminate the designation of items
for inclusion in the record on appeal and instead would define the
record on appeal in a manner that conforms more closely to Rule 16 of
the Federal Rules of Appellate Procedure. Materials designated or
submitted by a whistleblower for the first time after the Commission
issues its Final Order

would not be deemed part of the administrative record.
    Under amended Rule 21F-13(b), the record on appeal therefore would
include the Final Order of the Commission, any materials that were
considered by the Commission in issuing the Final Order, and any
materials that were part of the claims process leading from the Notice
of Covered Action to the Final Order. In the interest of clarity, Rule
21F-13(b) would specify that this includes, but is not limited to, the
materials that are part of the claims process described in Rules 21F-10
and 21F-11 and proposed Rule 21F-18: The Notice of Covered Action,
whistleblower award applications filed by the claimant, the Preliminary
Determination (or Preliminary Summary Disposition), materials that were
considered by the Claims Review Staff in issuing the Preliminary
Determination (or by the Office of the Whistleblower in issuing a
Preliminary Summary Disposition), and materials that were timely
submitted by the claimant in response to the Preliminary Determination
(or the Preliminary Summary Disposition). Additional materials not
specifically listed in the parenthetical in proposed Rule 21F-13(b)
might become part of the claims process and therefore part of the
record if, for example, the Office of the Whistleblower obtains
materials from a third party and provides them to the Commission for
its consideration in resolving a whistleblower award application. See
Rule 21F-12(a)(6).
    In addition, we are proposing to amend the second sentence of Rule
21F-13(b) to clarify that the record on appeal would not include any
pre-decisional or internal deliberative process materials that are
prepared exclusively to assist either the Commission or the CRS. That
provision currently references only the Commission. This change would
clarify the Commission's current practice in order to give greater
clarity to claimants pursuing appeals.
    We also propose adding a third sentence to Rule 21F-13(b) providing
that, when more than one claimant applies for an award under a single
Notice of Covered Action, the Commission may exclude from the record on
appeal any materials that exclusively concern any claimant other than
the claimant who brought the appeal, as necessary to comply with the
confidentiality protections in Section 21F(h)(2)(A) of the Exchange
Act.\216\ This sentence would codify the Commission's current practice
in order to give greater clarity to claimants pursuing appeals.
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    \216\ 15 U.S.C. 78u-6(h)(2)(A).
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Request for Comment
    34. We seek comments about whether the proposed language
sufficiently conforms to Rule 16 of the Federal Rules of Appellate
Procedure and whether alternative language would provide greater
conformity or clarity.

K. Proposed Rule 21F-18 Establishing a Summary Disposition Process
217
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    \217\ The Commission anticipates that proposed Rule 21F-18, if
adopted, would apply to any whistleblower award application for
which the Commission has not yet issued a Preliminary Determination
as of the effective date of the proposed rules, as well as to any
future award applications that might be filed.
---------------------------------------------------------------------------

    Over the course of the years that the Commission has implemented
the whistleblower award program, it has become apparent to us that a
significant number of award applications may be denied on relatively
straightforward grounds because they do not implicate novel or
important legal or policy questions. These grounds for denial include,
among other things, the fact that the individual did not comply with
the form-and-manner requirements as specified in Rule 21F-9 for
submitting information to be eligible for an award, or that the
information was not used by the staff responsible for investigating,
preparing and litigating the covered action and thus the individual's
information did not ``lead to'' the success of the covered action.
    In an effort to provide a more timely resolution of relatively
straightforward denials, we are proposing a summary disposition
process. This process would be in lieu of the claims adjudication
processes that are specified in Rule 21F-10 and Rule 21F-11.\218\ The
principal difference between the proposed summary disposition process
and the existing processes specified in Rule 21F-10 and 21F-11 is that
for a claim designated for summary disposition the CRS would not be
involved in reviewing the record, issuing a Preliminary Determination,
considering any written response filed by the claimant, or issuing the
Proposed Final Determination; these functions would be assumed by the
Office of the Whistleblower in an effort to streamline the Commission's
consideration of denials that are relatively straightforward.
---------------------------------------------------------------------------

    \218\ 17 CFR 240.21F-10; 17 CFR 240.21F-11.
---------------------------------------------------------------------------

    The proposed summary disposition process incorporates two other
modifications that should help expedite the processing of denials.
First, the 30-day period for replying to a Preliminary Summary
Disposition would be shorter than the 60-day period for replying to a
Preliminary Determination provided for by Rule 21F-10(e)(2) \219\ and
21F-11(e)(2).\220\ We believe that this shorter period should be
sufficient for a claimant to reply and that it is appropriate given
that the matters subject to summary disposition should be relatively
straightforward. Second, under the proposed summary disposition
process, a claimant would not have the opportunity to receive the full
administrative record upon which a Preliminary Denial would have been
based. Instead, the Office of the Whistleblower would (to the extent
appropriate given the nature of the denial) provide the claimant with a
staff declaration that contains the pertinent facts upon which the
Preliminary Summary Disposition is based. Given the relatively
straightforward nature of the matters that would generally be eligible
for summary disposition, we believe that this modification from the
record-review process specified in Rules 21F-10 and 21F-11 should still
afford any claimant a sufficient opportunity to provide a meaningful
reply to a Preliminary Summary Denial. This should eliminate the delay
that can arise when a claimant does not expeditiously request the
record, thereby helping to further expedite the summary adjudication
process.
---------------------------------------------------------------------------

    \219\ 17 CFR 240.21F-10(e)(2) (providing that if an individual
decides to contest the Preliminary Determination, he or she must
submit his or her written response and supporting materials within
sixty (60) calendar days of the date of the Preliminary
Determination, or if a request to review materials is made pursuant
to paragraph (e)(1) of the section, then within sixty (60) calendar
days of the Office of the Whistleblower making those materials
available for your review.).
    \220\ 17 CFR 240.21F-11(e)(2). We believe that 30-day response
period is sufficient and have considered the fact that judicial
proceedings often rely on this same time period for filing
responsive materials. See, e.g., Fed. R. of App. P. 31(a)(1)
(establishing a default 30-day time period for an appellee or
respondent to file a response brief to the appellant or petitioner's
opening brief). See also Rule 450(a) of the SEC's Rules of Practice
(providing that in adjudicatory proceedings pending before the
Commission ``[o]pposition briefs shall be filed within 30 days after
the date opening briefs are due'').
---------------------------------------------------------------------------

    The proposed summary disposition process would be available for any
non-meritorious award application that falls within any of the
following five categories: (1) Untimely award application; \221\ (2)
noncompliance with the requirements of Rule 21F-9,\222\ which concerns
the manner for submitting a tip to be eligible for an

award; (3) claimant's information was never provided to or used by the
staff handling the covered action or the underlying investigation (or
examination), and those staff members otherwise had no contact with the
claimant; (4) noncompliance with Rule 21F-8(b),\223\ which requires an
applicant to submit supplemental information that the Commission may
require \224\ and to enter into a confidentiality agreement; and (5)
failure to specify in the award application the submission that the
claimant made pursuant to Rule 21F-9(a) \225\ upon which the claim to
an award is based. In addition, the proposed rule would provide that
other defective or non-meritorious award applications could be subject
to the summary disposition process under appropriate circumstances.
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    \221\ The time periods for submitting an award application are
specified in Rule 21F-10(b) and Rule 21F-11(b). See 17 CFR 240.21F-
10(b) & 240.21F-11(b).
    \222\ 17 CFR 240.21F-9.
    \223\ 17 CFR 240.21F-8(b).
    \224\ The authority to require additional information of an
applicant is delegated to the Office of the Whistleblower. See 17
CFR 240.21F-10(d).
    \225\ 17 CFR 240.21F-9(a).
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    Under the proposed summary disposition process, the Office of the
Whistleblower would issue a Preliminary Summary Disposition denying an
application. This Preliminary Summary Disposition would be in lieu of
the Preliminary Determination that the Claims Review Staff would issue
under Rule 21F-10 or Rule 21F-11. A claimant would then have a 30-day
period to reply with a written response explaining the grounds for
contesting the denial. Failure to file a timely written response would
constitute a failure to exhaust the administrative process and the
Preliminary Summary Disposition would automatically become the final
order with respect to that applicant's award claim. If an applicant
does file a timely response, the Office of the Whistleblower would
consider the full record, including the applicant's response (and any
materials the applicant timely submitted therewith), and prepare a
Proposed Final Summary Disposition to be provided to the
Commission.\226\ Similar to the procedure under Rule 21F-10 and 21F-11,
the Commission would have thirty (30) days to consider the Proposed
Final Summary Disposition; if no Commissioner requests that the full
Commission consider the Proposed Final Summary Disposition within the
30-day period, it would become the final order of the Commission. If a
Commissioner does request full Commission consideration, the Commission
would consider the matter and issue a final order. The Office of the
Whistleblower would then notify the claimant of the final order.
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    \226\ Although the CRS has to date approved all proposed final
orders involving a challenge to a preliminary determination, we do
not believe the absence of the CRS's role at the comparable stage of
the proposed summary disposition process should have a meaningful
impact given the relatively straight-forward nature of the claims
that would be processed under the proposed rule. Further, as a
matter of agency internal procedure, all proposed final orders are
reviewed by the Office of the General Counsel and we anticipate that
this review would occur in connection with all Proposed Summary
Dispositions issued under this proposed rule, further reducing any
potential negative impact from the elimination of the CRS's role.
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    If the Commission has received more than one award application for
a particular matter, the Office of the Whistleblower could use the
summary disposition process for any of those award applications that
qualify, even if other of the applications are subjected to the regular
consideration processes specified in Rules 21F-10 and 21F-11. Even in
the multiple whistleblower context, we believe that there could be
efficiencies in summarily considering and disposing of applications
that constitute reasonably straightforward denials. For example, this
could free up staff resources to concentrate on the meritorious claims
or the more difficult determinations. Relatedly, to the extent that a
claim is denied under the summary disposition process while other
claims may remain pending under the Rule 21F-10 or Rule 21F-11 process,
this should allow the summarily denied claimant an earlier ability to
exhaust his opportunities for judicial review.\227\ This, in turn, may
potentially permit the Commission to more promptly pay any meritorious
whistleblower on any award that may eventually result from the final
order issued under the Rule 21F-10 or Rule 21F-11 process.\228\
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    \227\ We note that, the Commission has consistently interpreted
Rules 10 and 11 to require that all claims processed under those
rules should be addressed in one omnibus final order. The summary
disposition process that we are proposing would, we believe, permit
a more expeditious adjudication of any relatively straightforward
denials that might otherwise have been folded into a final order
under Rule 10 or 11.
    \228\ Pursuant to Rule 21F-14(c)(2), 17 CFR 240.21F-14(c)(2),
the Commission cannot pay an award to any meritorious whistleblower
in a particular matter until the completion of the appeals process
for all whistleblower award claims has been exhausted.
---------------------------------------------------------------------------

    Finally, the proposed rule would clarify that Rule 21F-12,\229\
which governs the items that may be considered when the Commission
entertains an award application under Rule 21F-10 or Rule 21F-11,
applies in the context of summary dispositions. Specifically, the
proposed rule would state that ``[i]n considering an award
determination pursuant to this rule, the Office of the Whistleblower
and the Commission may rely upon the items specified in [Rule 21F-
12(a)]. Further, [Rule 21F-12(b)] applies to summary dispositions.''
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    \229\ 17 CFR 240.21F-12.
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Request for Comment
    35. We seek comments about the proposed summary disposition
process, including whether the categories of award applications that
would be eligible for summary disposition are appropriate, whether the
proposal would afford claimants sufficient process, and whether there
are any specific modifications that we should consider making to the
proposed process.

L. Technical Amendment to Rule 21F-4(c)(2) \230\
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    \230\ The Commission anticipates this proposed rule change, if
adopted, would apply to all new whistleblower award applications
filed after the effective date of the amended final rules, as well
as all whistleblower award applications that are pending and have
not yet been the subject of a final order of the Commission by the
effective date.
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    We propose to amend Rule 21F-4(c)(2) \231\ concerning the
definition of information that led to a successful enforcement action
because it contains an erroneous cross-reference. The reference is
intended to be to Rule 21F-4(b)(5) regarding the definition of original
source. The rule currently refers to paragraph (b)(4) of the section.
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    \231\ 17 CFR 240.21F-4(c)(2).
---------------------------------------------------------------------------

III. Proposed Interpretive Guidance Regarding the Meaning and
Application of ``independent analysis'' as Defined in Exchange Act Rule
21F-4(b)(3) \232\
---------------------------------------------------------------------------

    \232\ 17 CFR 240.21F-4(b)(3). Although we are proposing this
interpretive guidance for public comment, the Commission may
determine to rely on the principles articulated therein for any
whistleblower claims that are currently pending because we believe
that this guidance clarifies the existing rules that define and
apply the term ``independent analysis.''
---------------------------------------------------------------------------

    Two core requirements of the whistleblower award program are: (1)
That the whistleblower must have provided ``original information'' to
the Commission; and (2) that such information must have ``led to'' the
successful enforcement of an action. Congress defined ``original
information'' in relevant part as information that is derived from
either a whistleblower's ``independent knowledge'' or the
whistleblower's independent ``analysis.'' This guidance addresses the
potential availability of a whistleblower award in cases where
information provided by a whistleblower is not based on the
whistleblower's

``independent knowledge'' but, instead, is premised on information
derived from the whistleblower's ``independent analysis'' of publicly
available information. Such cases implicate both the scope of the
independent analysis prong of the ``original information'' requirement
and what is necessary for independent analysis to ``lead to'' the
successful enforcement of an action.
    In formulating our views on how a whistleblower may satisfy the
requirement of ``original information'' through the alternative of
``independent analysis,'' we have considered Congress's and the
Commission's determinations to substantially restrict any role for
publicly available information in potential whistleblower awards. When
the Commission in 2011 adopted the rules implementing the whistleblower
program, it explained that paying awards for publicly available
information was not consistent with Congress's purpose in establishing
the program. Specifically, the Commission stated that ``Congress
primarily intended our program `to motivate those with inside knowledge
to come forward and assist the Government to identify and prosecute
persons who have violated the securities laws[.]' '' \233\ The
Commission further acknowledged that Congress sought to make awards
available in cases where ``highly-probative, expert analysis of data .
. . suggest[s] an important new avenue of inquiry, or otherwise
materially advance[s] an existing investigation.'' \234\ But
critically, the Commission made clear that, in its view, Congress did
not intend to base awards ``on information that is available to the
general public.'' \235\
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    \233\ 76 FR 34300, 34311/3.
    \234\ Id. at 34312/3.
    \235\ Id. at 34311/3. We note that although publicly available
information may not serve as the basis for an award, the provision
of such information to the Commission can be an important public
service.
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    Independent Analysis Standard. Consistent with these understandings
of congressional intent and consistent with the Commission's views when
it adopted the definition of ``original information'' in the original
whistleblower rulemaking, we are proposing the following standard: In
order to qualify as ``independent analysis,'' a whistleblower's
submission must provide evaluation, assessment, or insight beyond what
would be reasonably apparent to the Commission from publicly available
information. In assessing whether this requirement is met, the
Commission would determine based on its own review of the relevant
facts during the award adjudication process whether the violations
could have been inferred from the facts available in public sources.
While we recognize that this standard does not constitute a bright
line, we believe that it should provide a solid foundation for the
Commission to apply when assessing awards involving potential
independent analysis.
    The Independent Analysis Must ``Lead to'' the Success of the
Enforcement Action. Even when this standard is met, however, a
whistleblower's independent analysis must still have ``led to'' a
successful covered enforcement action. This standard requires an
assessment of whether the whistleblower's analysis--as distinct from
the publicly available information on which the analysis was based--
either (1) was a principal motivating factor in the staff's decision to
open its investigation, or (2) made a substantial and important
contribution to the success of an existing investigation.
    In the sections that follow, we explain the relevant background and
reasoning for the standards that we have set forth above.

A. Background: ``Original Information'' and Publicly Available
Information

    In formulating this guidance, we have considered the qui tam
provisions of the False Claims Act,\236\ the federal government's
principal bounty statute and an important forerunner of the
Commission's whistleblower award authority.\237\ The False Claims Act
requires that qui tam relators must provide their own, independent
information--and not publicly available information--in order to avoid
the so-called ``public disclosure bar.'' \238\ Specifically, in its
present form (and excluding one exception that is not relevant here
\239\), the public disclosure bar requires a court to dismiss a qui tam
action ``if substantially the same allegations or transactions as
alleged in the action or claim were publicly disclosed'' in certain
designated sources.\240\
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    \236\ 31 U.S.C. 3730.
    \237\ See Proposed Rules for Implementing the Whistleblower
Provisions of Section 21F of the Securities Exchange Act of 1934,
Release No. 34-63237, 75 FR 70488, 70491 n.14 (Nov. 3, 2010) (noting
that cases interpreting the qui tam provisions of the False Claims
Act can provide helpful guidance in the interpretation of Section
21F, though not necessarily controlling or authoritative in all
circumstances).
    \238\ See Graham County Soil and Water Conservation Dist. v.
United States ex rel. Wilson, 559 U.S. 280, 294 (2010) (explaining
that, through the public disclosure bar, Congress sought ``the
golden mean between adequate incentives for whistle-blowing insiders
with genuinely valuable information and discouragement of
opportunistic plaintiffs who have no significant information to
contribute of their own'') (quoting, United States ex rel.
Springfield Terminal Railway v. Quinn, 14 F.3d 645, 649 (D.C. Cir.
1994)).
    \239\ 31 U.S.C. 3730(4)(A).
    \240\ Not all public sources of information implicate the public
disclosure bar. The sources specified in the statute are a Federal
criminal, civil, or administrative hearing in which the Government
or its agent is a party; a congressional, Government Accountability
Office, or other Federal report, hearing, audit, or investigation;
or the news media. There is a limited exception for situations where
the qui tam relator was an original source of the information. 31
U.S.C. 3730(e)(4)(A).
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    In Section 21F, Congress similarly limited awards to ``original
information''--defining the term to require a whistleblower's own,
independent information rather than publicly available
information.\241\ While not taking precisely the same approach as in
the False Claims Act, Congress nonetheless required that ``original
information'' for purposes of the Commission's award program must not
be exclusively derived from the news media or certain other public
sources.\242\ Further, Congress affirmatively required that ``original
information'' be derived from a whistleblower's ``independent knowledge
or analysis.'' \243\ The Senate report issued in connection with Dodd-

Frank, which enacted Section 21F,\244\ explained Congress's expectation
that in order to obtain an award a whistleblower would be required to
provide the ``critical components'' of information that supported an
enforcement action beyond any information about the matter that was
publicly available.\245\
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    \241\ Although the term ``original information'' does not appear
in the False Claims Act, courts have used the term to differentiate
a qui tam relator's own, independent information upon which an award
may be based from information that is available in the designated
public sources. See, e.g., United States ex rel. Colquitt v. Abbott
Labs, 858 F.3d 365, 374-75 (5th Cir. 2017); United States v. Walker,
438 F. A'ppx 885, 888 (11th Cir. 2011); United States ex rel. JDJ
and Associates LLP v. Natixis, 2017 U.S. Dist. Lexis 164106, *33
(S.D.N.Y. 2017). In United States ex rel. Marcus v. Hess, 317 U.S.
537 (1943), a seminal False Claims Act case that prompted Congress
to enact a forerunner of the public disclosure bar, the Court
permitted a qui tam suit to proceed where the same defendants had
been criminally indicted for the same conduct alleged in the qui tam
action. In dissent, Justice Jackson termed it a ``misuse of the
statute'' to permit an action where the averments in the complaint
substantially copied the indictment and it was not shown that the
petitioner ``had any original information, that he added anything by
investigations of his own, . . . .'' 317 U.S. at 558 (Jackson, J.,
dissenting). ``Original information'' as a term to describe
information upon which an award may be based has been a part of
various federal bounty statutes for more than 100 years. See, e.g.,
United States v. Simons, 7 F. 709 (E.D. Mich. 1881) (discussing
statute that permitted awards for ``original information concerning
any fraud upon the customs revenue'').
    \242\ 15 U.S.C. 78u-6(a)(3)(C). These other sources are
allegations made in a judicial or administrative hearing, or in a
governmental report, hearing, audit, or investigation (unless the
whistleblower is a source of the information). Further, we note that
both the False Claims Act and the Internal Revenue Service
whistleblower statute permit discretionary awards of up to 10% in
the event that the government proceeds with a case based principally
on public disclosures. See 31 U.S.C. 3730(d)(1); 26 U.S.C.
7623(b)(2)(A). Congress did not include any similar discretionary
award authority in Section 21F.
    \243\ 15 U.S.C. 78u-6(a)(3)(A).
    \244\ Public Law 111-203, section 922(a), 124 Stat. 1376, 1841
(July 21, 2010).
    \245\ See S. Rep. No. 111-176 at 111 (2010). The Senate Report
stated: `` `Original information' is defined as information that is
derived from the independent analysis or knowledge of the
whistleblower, and is not derived from an allegation in court or
government reports, and is not exclusively from news media. In
circumstances when bits and pieces of the whistleblower's
information were known to the media prior to the emergence of the
whistleblower, and that for the purposes of the SEC enforcement the
critical components of the information was supplied by the
whistleblower, the intent of the Committee is to require the SEC to
reward such person(s) in accordance with the degree of assistance
that was provided.''
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    In promulgating rules to implement the whistleblower program, the
Commission further restricted any role for publicly available
information in a potential whistleblower award. While Congress had
defined ``original information'' as that which is derived from a
whistleblower's ``independent knowledge'' or ``independent analysis,''
Congress did not define either of these terms. The Commission's
definitional rules, however, effectively preclude awards merely for the
submission of publicly available information.
    First, the Commission excluded publicly available information as a
source of a whistleblower's ``independent knowledge,'' which the
Commission defined as ``factual information in [the whistleblower's
possession] that is not derived from publicly available sources.''
\246\ At the adopting stage for the whistleblower rules, the Commission
considered comments that were critical of this blanket exclusion and
that recommended some allowance for particular kinds of public
information.\247\ The Commission rejected such an approach and chose to
adopt the broad exclusion of any publicly available information that
had been proposed.\248\ Moreover, the Commission interpreted ``publicly
available sources'' expansively to include not only sources that are
widely disseminated (such as corporate press releases and filings,
media reports, and information on the internet), but also sources that,
though not widely disseminated, are generally available to the public
(such as court filings and documents obtained through Freedom of
Information Act requests).\249\
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    \246\ 17 CFR 240.21F-4(b)(2) (emphasis added).
    \247\ For example, one commenter suggested that the Commission
should exclude only information from sources such as news media and
governmental reports that are specifically set forth in the statute.
See Securities Whistleblower Incentives and Protections, Release No.
34-64545, 76 FR 34300, 34311/3 (June 13, 2011) (citing comment
letter from Taxpayers Against Fraud).
    \248\ Id.
    \249\ 76 FR 34300, 34311/1.
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    Second, in defining the term ``independent analysis,'' the
Commission permitted a whistleblower to employ publicly available
information, but required that the whistleblower produce insights that
are non-public, providing that independent analysis means an
individual's own analysis, whether done alone or in combination with
others and analysis means an individual's examination and evaluation of
information that may be publicly available, but which reveals
information that is not generally known or available to the
public.\250\
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    \250\ 17 CFR 240.21F-4(b)(3).
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    Significantly, the Commission considered--and rejected--a
suggestion that the proposed definition of ``independent analysis'' be
revised to permit an award to a whistleblower whose tip brings publicly
available information to the staff's attention:

    We believe that ``independent analysis'' requires that the
whistleblower do more than merely point the staff to disparate
publicly available information that the whistleblower has assembled,
whether or not the staff was previously ``aware of'' the
information. ``Independent analysis'' requires that the
whistleblower bring to the public information some additional
evaluation, assessment, or insight.\251\

    \251\ 76 FR 34300, 34305, 34312/3.
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    In setting forth the standard for ``independent analysis'' in this
guidance, we are particularly mindful that the appropriate standard
should be sufficiently demanding that it would not undermine the clear
exclusion of public information from the definition of ``independent
knowledge.'' Any other approach would, in our view, undermine the
overall framework that was established by the Commission in 2011 when
it adopted the definitions of ``independent knowledge'' and
``independent analysis.''

B. ``Independent Analysis''

    As noted, the Commission defined ``analysis'' as the
whistleblower's ``examination and evaluation of information that may be
publicly available, but which reveals information that is not generally
known or available to the public.'' \252\ Thus, if a whistleblower
submits publicly available information in a TCR and alleges a fraud or
other securities violations on the basis of that information, the
Commission must determine whether the whistleblower's ``examination and
evaluation'' of the publicly available information ``reveal[ed]'' the
possible violations.
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    \252\ 17 CFR 240.21F-4(b)(3).
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    To ``reveal'' means to make something known that was previously
secret or hidden, or to open something up to view.\253\ Accordingly, to
be considered ``analysis,'' the whistleblower's submission must include
some insight--beyond the existence of the publicly available
information--that is revelatory; that is, the whistleblower's
evaluation of the publicly available information should do the work of
making known and opening up to view for the Commission the possible
securities violations.
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    \253\ See Merriam-Webster Dictionary, available at https://www.merriam-webster.com/dictionary/reveal; Oxford English
Dictionary, available at https://en.oxforddictionaries.com/definition/reveal; Cambridge Dictionary, available at http://dictionary.cambridge.org/us/dictionary/english/reveal; Black's Law
Dictionary (10th ed. 2014) (citing ``to reveal'' as one definition
of ``disclose''); see also 15 U.S.C. 78u-6(h)(2)(A) (prohibiting the
Commission or staff from disclosing information ``which could
reasonably be expected to reveal the identity of a whistleblower. .
. .'') (emphasis added).
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    As a principal illustration of how to apply our rule on
``independent analysis,'' we look to the model that Congress had before
it at the time it enacted the whistleblower program; the work of Harry
Markopolos in his efforts to expose Bernard Madoff's Ponzi scheme.\254\
Among other things, Markopolos brought to bear his expertise as a
certified fraud examiner and his knowledge of the options markets to
demonstrate that Madoff's purported investment strategy could not have
produced his claimed investment returns.\255\ For example, in a 2000
submission, beginning from the premise that Madoff purported to manage
between $3 billion and $7 billion in assets pursuant to his ``split-
strike conversion'' strategy, Markopolos explained that the strategy as
described

in public materials ``would require lots of options trading and lots of
options in open interest'' \256\ for hedging purposes. Based upon his
calculations of the total value of call option open interest on the
Chicago Board Option Exchange and of OEX put option open interest,
Markopolos revealed that ```hedging cannot be taking place as
described. . . . [I]f only $3 billion are allocated to this strategy
then there still aren't enough options in open interest for this type
of hedging to occur, since Madoff would be at least \1/3\ of the open
interest and we know that is not the case.' '' \257\ Similarly, in a
2005 submission, Markopolos offered a specific mathematical
illustration of how he believed the income and protection parts of
Madoff's strategy would be expected to function under real-world market
conditions, arguing that the income that might be expected from stock
dividends and the sale of equity call options offset by the cost of
purchasing put options, made Madoff's claimed returns ``way too good to
be true.'' \258\ In the same submission, Markopolos also calculated
that Madoff would have had to account for more than 100% of the total
OEX put option open interest in order to hedge his stock holdings as
depicted in certain marketing literature.\259\
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    \254\ See S. Rep. No. 111-176 at 110 (2010) (citing to
Markopolos's testimony).
    \255\ Markopolos also submitted a large amount of information
that likely would have satisfied the ``independent knowledge'' prong
of ``original information'' under Rule 21F-4(b)(2), 17 CFR 240.21F-
4(b)(2). For example, he described his own firm's inability to
duplicate Madoff's returns using the same strategy and provided
information about Madoff's claims and purported operations that he
obtained from speaking with third parties who invested with Madoff.
See Investigation of Failure of the SEC to Uncover Bernard Madoff's
Ponzi Scheme, Report No. OIG-509 (Aug. 31, 2009) (``OIG Report''),
Exh. 137, available at https://www.sec.gov/news/studies/2009/oig-509/oig-509_exhibits.htm.
    \256\ OIG Report, Exh. 134.
    \257\ OIG Report at 62, quoting Markopolos 2000 submission, Exh.
134.
    \258\ OIG Report, Exh. 268.
    \259\ OIG Report, Exh. 268.
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    Markopolos's submissions included information that would qualify as
``independent analysis'' as defined in our whistleblower rules (and
explained further in this guidance) if submitted today. Markopolos's
information was ``highly-probative,'' \260\ going beyond the publicly
available information itself to ``reveal'' that Madoff's claimed
returns were unachievable under real market conditions. We anticipate
that we may find a requisite level of ``analysis'' in analogous cases
where an individual with a high level of specialized training or
expertise reviews publicly available information and illuminates for
the Commission possible violations that are obscured because of the
technical nature of the source material.\261\
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    \260\ 76 FR 34300, 34312/3.
    \261\ However, we caution that we expect this standard may be
particularly demanding for attorneys and accountants who seek
whistleblower awards based on their review of publicly available
information. As the Enforcement staff is substantially comprised of
experienced attorneys and accountants, an outside attorney or
accountant would generally be expected to contribute insights or
revelations that would not be reasonably evident to an accountant or
attorney on the Enforcement staff who reviewed the same publicly
available information.
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    Importantly, this is not to suggest that ``independent analysis''
is limited to persons with technical expertise or other specialized
training. In each case, the touchstone is whether the whistleblower's
submission is revelatory in utilizing publicly available information in
a way that goes beyond the information itself and affords the
Commission with important insights or information about possible
violations.
    While ``independent analysis'' is evident in Markopolos's tips,
other submissions that utilize publicly available information may not
be so clear. However, we believe that case law interpreting the False
Claims Act's public disclosure bar generally suggests a helpful
framework for distinguishing tips in which the whistleblower's
``independent analysis'' of publicly available information reveals
important information about possible violations beyond the public
sources themselves. The public disclosure bar precludes recovery when
``substantially the same allegations or transactions'' as alleged by
the qui tam relator were previously disclosed publicly in one of the
designated sources. The D.C. Circuit and other federal courts of
appeals have held that fraudulent transactions are publicly disclosed--
and a qui tam suit thus barred--when essential facts that are
sufficient to give rise to an inference of fraud are in the public
domain.\262\ This rule bars qui tam suits when publicly disclosed
information provides ``the government . . . [with] enough information
`to investigate the case and to make a decision whether to prosecute'
or . . . `could at least have alerted law-enforcement authorities to