rule recognizes that there are cases that will involve multiple
meritorious whistleblowers. Where at least one of the multiple
meritorious whistleblowers would qualify for the presumption if that
individual were the sole meritorious whistleblower, the new rule will
operate to ensure that the total aggregate award paid to all
meritorious whistleblowers is the statutory maximum. But because these
cases could involve any number of meritorious whistleblowers and
because these cases could reflect any number of whistleblowers that
might qualify for the enhancement rule were they the only whistleblower
in the matter, the new rule provides flexibility in how the Commission
should allocate the statutory maximum Award Amount in these instances.
Nonetheless, the rule requires that in allocating that amount among the
meritorious claimants, the Commission will consider all relevant
facts.\111\
---------------------------------------------------------------------------

    \111\ We have decided not to adopt the proposed mechanism that
would authorize the Commission to increase the $5 million figure
through the publication of an order in the Federal Register. Such a
mechanism is no longer necessary given our decision to expand the
scope of the rule and the fact that (based on historical experience)
the vast majority of awards will now be covered by this rule given
its expanded scope.
---------------------------------------------------------------------------

    In adopting this rule, we concur with those commenters who
expressed the view that this new provision could help to further
incentivize whistleblowers to come forward to the Commission. Contrary
to what some commenters suggested, we believe that we are significantly
increasing certainty. When there are no negative award factors present
and the statutory maximum award of 30 percent is $5 million or less,
there will be a presumption in favor of an Award Amount at the
statutory maximum, subject to the Exclusions.\112\ Thus, we believe
that this new rule will likely increase--not decrease--a reasonable
individual's willingness to report potential securities-law
violations.\113\
---------------------------------------------------------------------------

    \112\ For awards where the statutory maximum award of 30 percent
is greater than $5 million, the Commission will continue to analyze
the Award Factors identified in Rule 21F-6 in determining the Award
Amount. Based on the historical application of the award factors, if
none of the negative Award Factors specified in Rule 21F-6(b) are
present, the award amount would be expected to be in the top third
of the award range.
    \113\ Morrell Letter.
---------------------------------------------------------------------------

    Lastly, we agree with the commenter that suggested that the
Commission already possesses discretionary authority to increase any
award to the statutory maximum. But expressly setting forth the
specific terms and eligibility criteria in the new rule should help
increase the public's confidence that the Commission will presumptively
set the Award Amount at the statutory maximum in those cases where none
of the negative award criteria specified in Rule 21F-6(b)(2) are
present, the statutory maximum award of 30 percent is $5 million or
less, and the Exclusions are not applicable.\114\
---------------------------------------------------------------------------

    \114\ For the reasons already discussed above, we do not agree
with the commenter that stated that Congress did not authorize the
Commission to utilize dollar-amount considerations in setting
awards. 15 U.S.C. 78u-6(c)(1). See also id. 78u-6(f).
---------------------------------------------------------------------------

F. Rule 21F-6(d)--Enhanced Review of Certain Awards

1. Proposed Rule
    The Commission proposed a new paragraph (d) that would add to Rule
21F-6's existing analytical framework by providing a mechanism for the
Commission in its discretion to conduct an enhanced review of awards in
situations where a whistleblower has provided information that led to
the success of one or more covered or related actions that,
collectively, result in at least $100 million in collected monetary
sanctions.
    This proposed provision would have formalized the exercise of the
Commission's discretion in setting Award Amounts in two respects where
the potential Award Amount might involve a large payout. First,
proposed paragraph (d)(1) would have expressly stated that the
Commission has the discretion to consider the potential dollar amount
when applying each of the existing award criteria.
    Second, proposed paragraph (d)(2) would have provided an express
mechanism for the Commission to adjust the award if, after
consideration of the existing Award Factors in paragraphs (a) and (b)
of Rule 21F-6, the Commission finds that the potential award (from any
Commission actions and related actions, collectively) exceeds what is
reasonably necessary to reward the whistleblower and to incentivize
similarly situated whistleblowers. Further, proposed paragraph (d)(2)
would have made clear that any increases or decreases to a
whistleblower's Award Amount under that paragraph shall not yield a
potential award payout (as assessed by the Commission at the time that
it makes the award determination) below $30 million, nor may any
reduction result in the total amount awarded to all meritorious
whistleblowers, collectively, for each covered or related action
constituting less than 10 percent of the monetary sanctions collected
in that action.

2. Comments Received
    This proposed rule received a substantial number of public
comments. Many of these letters were one of two different form letters
that opposed proposed paragraph (d), as described in the letters. The
first set of these form letters incorrectly stated that proposed
paragraph (d) would ``cap[] rewards in the largest cases to the lowest
percentage rate.'' \115\ The second set of form letters--contrary to
the explanations offered in the Proposing Release--claimed that
paragraph (d) would ``plac[e] an arbitrary limit'' on rewards and
``authorize . . . drastic reductions in the amount of rewards in major
fraud cases.'' \116\ The proposed rule would not have imposed a ``cap''
or an ``arbitrary limit,'' nor would it have resulted in a ``drastic
reduction'' in Award Amounts. Aside from the form-letter comments, the
Commission received approximately 30 unique comment letters from
persons expressing views on proposed paragraph (d).
---------------------------------------------------------------------------

    \115\ Form Letter A.
    \116\ Form Letter C.
---------------------------------------------------------------------------

    A minority of the unique comments supported the proposal.\117\ One
such commenter stated that there is a public policy interest in
allowing the Commission to make discretionary increases or decreases to
Award Amounts with extremely large payouts because, according to the
commenter, there is not necessarily a correlation between the size of a
judgment and the seriousness of the violation; as a result, it could be
perceived as unfair if an uncomplicated whistleblower submission could
earn a whistleblower a significant windfall.\118\ Relatedly, another
commenter asserted that awards substantially over $30 million create a
potential public perception of ``jackpot justice'' that may harm the
overall credibility of the Commission's enforcement program.\119\
Additionally, two commenters asserted that awards over $30 million
provide little marginal incentive for a whistleblower to come forward
because individuals who receive awards over that amount should be
financially secure for the rest of their lives.\120\ Another commenter
who supported proposed paragraph (d) stated that the Commission should
have the flexibility to adjust awards downward as it deems appropriate
provided that the Commission explains its reasoning in the award
order.\121\
---------------------------------------------------------------------------

    \117\ The Commission also received a draft paper that supported
proposed Rule 21F-6(d), asserting (among other things) that relying
strictly on award percentages (without consideration of the
corresponding dollar amount) ``does not ensure that awards will not
vastly exceed what is necessary to incentivize whistleblowers to
come forward[.]'' Amanda M. Rose, Calculating SEC Whistleblower
Awards: A Theoretical Approach (May 28, 2019 Draft).
    \118\ See Anonymous-9 Letter.
    \119\ See SIFMA Letter.
    \120\ See SIFMA Letter; CWC Letter.
    \121\ See letter from Anonymous-123 (Oct. 31, 2018).
---------------------------------------------------------------------------

    With respect to the unique comment letters opposing the proposed
provision, the principal arguments against it generally related to the
mechanism in paragraph (d)(2) that would formalize the use of
Commission discretion to reduce large awards downward--but never below
$30 million--under certain circumstances.\122\ The principal arguments
against paragraph (d)(2) are listed below.
---------------------------------------------------------------------------

    \122\ Several commenters noted that the proposed rule may be
unnecessary because the Commission has not made any awards above the
$30 million threshold. See, e.g., TAF Letter. But in fact the
Commission had issued two awards exceeding $30 million to a single
whistleblower. See In the Matter of the Claims for an Award in
Connection with a Notice of Covered Action, Exchange Act Release No.
34-82987, 2018 WL 1378788 (Mar. 19, 2018); In the Matter of the
Claims for an Award in Connection with a Notice of Covered Action,
Exchange Act Release No. 34-73174, 2014 WL 4678597 (Sept. 22, 2014).
Moreover, since the comments in question were received, the
Commission has made additional awards to individual whistleblowers
above $30 million. See, e.g., In the Matter of the Claims for an
Award in Connection with a Notice of Covered Action, Exchange Act
Release No. 34-89002, 2020 WL 3030497 (June 4, 2020); In the Matter
of the Claims for an Award in Connection with a Notice of Covered
Action, Exchange Act Release No. 34-85412, 2019 WL 1353776 (Mar. 26,
2019).
---------------------------------------------------------------------------

     By permitting a reduction to or a capping of awards, the
provision could disincentivize whistleblowers who may have information
about massive frauds or other securities law violations.\123\
---------------------------------------------------------------------------

    \123\ See, e.g., TAF Letter; Cohen Milstein Letter; Markopolos
Letter; Public Citizen Letter.
---------------------------------------------------------------------------

     Large awards are important to the program's success
because these awards generate public awareness of the program.\124\
---------------------------------------------------------------------------

    \124\ See, e.g., TAF Letter; National Whistleblower Center
Letter (Sept. 18, 2018) (``NWC Sept. 18 Letter'').
---------------------------------------------------------------------------

     The proposal to reduce awards could contravene the
statutory language that prohibits the Commission from taking the IPF's
balance into account when making whistleblower award
determinations.\125\
---------------------------------------------------------------------------

    \125\ See, e.g., TAF Letter; AFREF Letter; NWC Sept. 18 Letter;
Sen. Grassley Letter.
---------------------------------------------------------------------------

     In considering whether to adopt a mechanism to reduce
large awards, the Commission should focus exclusively on motivating
people who know of potential securities law violations to report the
violation and not on whether the monies could be used for other
important public purposes.\126\
---------------------------------------------------------------------------

    \126\ See Admati & Steele Letter; NWC Sept. 18 Letter; Sen.
Grassley Letter.
---------------------------------------------------------------------------

     The proposal would establish a 10 percent cap for awards
above $30 million and the statute does not permit such a cap.\127\
---------------------------------------------------------------------------

    \127\ See TAF Letter; letter from Taylor S. Amarel (Aug. 16,
2018).
---------------------------------------------------------------------------

     By operating as a 10 percent cap on whistleblower awards,
the rule could decrease the amount of overseas violations of the
securities laws that are detected because large awards incentivize
foreigners who may lack employment anti-retaliation protections under
U.S. law.\128\
---------------------------------------------------------------------------

    \128\ See NWC Sept. 18 Letter.
---------------------------------------------------------------------------

     A 10 percent cap on awards could discourage companies from
maintaining adequate internal compliance programs if companies are
aware that whistleblowers are less likely to report potential
violations to the Commission.\129\
---------------------------------------------------------------------------

    \129\ See NWC Sept. 18 Letter; see also Sen. Grassley Letter.
---------------------------------------------------------------------------

     Large awards are needed to help mitigate the cost of
professional and social sanctions that whistleblowers might
experience.\130\
---------------------------------------------------------------------------

    \130\ See, e.g., letter from Wampler Buchanan Walker Chabrow
Banciella & Stanley, P.A. (Sept. 14, 2018) (``Wampler Letter'');
Sen. Grassley Letter.
---------------------------------------------------------------------------

     The proposed rule would introduce an additional layer of
uncertainty for potential whistleblowers and thus could reduce their
willingness to assume the risks associated with reporting.\131\
---------------------------------------------------------------------------

    \131\ See, e.g., TAF Letter; NWC Sept. 18 Letter; Better Markets
Letter.
---------------------------------------------------------------------------

     A ``cap'' would be unfair to individuals who disclose
industry-wide frauds because they might no longer be able to work in
their chosen field.\132\
---------------------------------------------------------------------------

    \132\ See Markopolos Letter.
---------------------------------------------------------------------------

     Proposed paragraph (d)(2)'s terms such as ``reasonably
necessary'' are ``fuzzy'' and may result in downward-award adjustments
based on political considerations.\133\
---------------------------------------------------------------------------

    \133\ See Think Computer Letter.
---------------------------------------------------------------------------

     The $30 million threshold in proposed paragraph (d)(2) is
not based on the value of the particular whistleblower's information or
behavior.\134\
---------------------------------------------------------------------------

    \134\ See Sen. Grassley Letter; see also Wampler Letter; letter
from Anonymous-43 (Sept. 9, 2018).
---------------------------------------------------------------------------

     ``By simultaneously increasing the smallest awards and
decreasing the largest awards,'' the Commission ``risks encouraging
more low-level employees to report minor fraud while potentially
deterring high-level executives from reporting major fraud.'' \135\
---------------------------------------------------------------------------

    \135\ See Admati & Steele Letter; see also Better Markets
Letter; Jansson Letter.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments on this proposed rule and further
analysis of the operation of the whistleblower

program to date, we have concluded that it is not necessary to adopt
the formalized mechanism for the Commission to exercise its discretion
to apply the Award Factors and set Award Amounts, and thus we have
determined not to adopt it. We note that many of the comments received
demonstrated a misperception of Proposed Rule 21F-6(d)(2) that would
have applied to exceedingly large potential awards. A significant
number of commenters asserted that this proposed rule would effectively
result in Award Amounts being capped or set at the statutory minimum.
We think it is important to correct this misunderstanding for potential
whistleblowers and the public generally: Proposed Rule 21F-6(d)(2) did
not introduce a cap nor was it intended to function in any way as an
award cap.\136\
---------------------------------------------------------------------------

    \136\ Our determination not to adopt proposed paragraph (d)(2)
or any other downward-departure mechanism is not intended to imply
that we agree with the arguments advanced by the comments opposing
it.
---------------------------------------------------------------------------

G. Rule 21F-6(b)--Interpretive Guidance Regarding the Meaning of
``unreasonable delay''

1. Proposed Guidance
    Rule 21F-6(b)(2) provides that the Commission will reduce an award
if it finds that the whistleblower engaged in ``unreasonable delay'' in
reporting a potential securities-law violation to the Commission.
Further, new Rule 21F-6(c)--as discussed above--provides that the
presumption under that rule will generally not be available if a
whistleblower engaged in unreasonable delay. In the Proposing Release,
we explained that any delay in reporting to the Commission beyond 180
days would be deemed presumptively unreasonable.
    In proposing this interpretive guidance, we explained that the
presumption could be overcome depending on potential highly unusual
facts and circumstances of a particular award application connected to
the delay. We also cautioned that shorter periods of delay (i.e., less
than 180 days) may also qualify as unreasonable depending on the
particular facts and circumstances at issue, including, for example,
whether the violations were ongoing, whether investors continued to
experience harm or the whistleblower continued to profit from the
wrongdoing during the period of the whistleblower's delay, or whether
the delay had a discernable impact on the monetary sanctions that were
ordered in the enforcement action.
2. Comments Received
    We received only a few comments on the proposed unreasonable-delay
guidance.\137\ One commenter voiced support, asserting that the
guidance would bring clarity and establish a general bright-line
standard that could be adjusted on a case-by-case basis.\138\
---------------------------------------------------------------------------

    \137\ See TAF Letter; Wampler Buchanan Letter; Think Computer
Letter.
    \138\ See TAF Letter.
---------------------------------------------------------------------------

    Two commenters expressed concerns about the guidance. One asserted
that a whistleblower who is genuinely continuing to pursue internal
compliance procedures past the 180-day period should not be
presumptively deemed to have unreasonably delayed reporting.\139\ The
other commenter who opposed the guidance expressed the view that the
Commission should continue to evaluate unreasonable delay on a case-by-
case basis.\140\
---------------------------------------------------------------------------

    \139\ See Wampler Letter.
    \140\ Think Computer Letter. This commenter noted as an
illustration supporting the continuation of a case-by-case basis
that it may sometimes be reasonable for a whistleblower to delay
beyond 180 days to avoid burdening the Commission with confusing and
potentially peripheral information. But once a potential
whistleblower knows the relevant facts that comprise a potential
securities law violation the potential whistleblower should take
appropriate steps to report those facts without delay irrespective
of any concern by the whistleblower that certain of the facts may
turn out to be peripheral or otherwise not relevant to the potential
violation.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments on this proposed rule and as a
result of further analysis of the operation of the whistleblower
program, we have determined not to adopt a specific time-based
presumption of unreasonable delay as interpretive guidance. We continue
to believe that a 180-day time period may be consistent with
unreasonable delay in many circumstances. But we are persuaded that the
idiosyncratic nature of the various claims the Commission is often
presented with counsels in favor of continuing to assess the facts and
circumstances of each case. Among other relevant considerations in
assessing whether a delay was in part or in whole unreasonable (and
whether any reduction is warranted if the delay was unreasonable)
include whether the delay was a result of circumstances beyond the
whistleblower's control and whether reasonable actions were taken by
the whistleblower during the period of delay.
    For example, we agree with the commenter who expressed the view
that delay by a whistleblower who is genuinely following internal
compliance procedures or otherwise genuinely attempting to address the
misconduct internally may be reasonable. Specifically, if the
whistleblower provides evidence for the administrative record that the
whistleblower was continuing to pursue the matter internally and the
company's responses to the whistleblower indicated that the company was
taking investigatory or remedial action in a diligent and timely
fashion, delay of up to or more than a 180-day period may be deemed
reasonable under the facts and circumstances. The Commission will also
continue to consider, for example, whether a whistleblower's delay was
in whole or in part reasonably attributable to illness or other
personal or family circumstances or to a reasonable amount of time
spent attempting to ascertain relevant facts or obtain an attorney in
order to remain anonymous.
    The Commission will continue to evaluate whether the violations
were continuing during the delay and whether investors were being
harmed during that time. Another relevant consideration that the
Commission may consider is whether the delay threatened the
Commission's ability to pursue the violations either because of the
statute of limitations,\141\ or the loss or destruction of evidence
during the period of delay. The Commission will also continue to
consider whether the whistleblower might ultimately profit from the
delay by obtaining a larger Award Amount because the failure to report
permitted the misconduct to continue, which can affect the calculation
of the monetary sanctions, including, for example, increased
disgorgement of ill-gotten gains and penalties. The Commission will
continue to set awards at amounts that appropriately reflect these
considerations.
---------------------------------------------------------------------------

    \141\ The Supreme Court has held that the Commission may not
seek disgorgement or penalties in any enforcement action that is
brought after five years of the date the violation occurred. See
Kokesh v. SEC, 137 S. Ct. 1635 (2017); Gabelli v. SEC, 568 U.S. 442
(2013).
---------------------------------------------------------------------------

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

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

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

conform whistleblower status, award eligibility, confidentiality, and
retaliation protection in light of the Supreme Court's holding
regarding Section 21F in Digital Realty Trust, Inc. v. Somers.\142\ In
Digital Realty, the Court held that Dodd-Frank's definition of
``whistleblower,'' codified in Section 21F(a)(6),\143\ requires a
report to the Commission as a prerequisite for retaliation protection,
and that the Commission's broader interpretation of that term in
connection with retaliation protection under Section 21F was therefore
not entitled to deference.\144\
---------------------------------------------------------------------------

    \142\ 138 S. Ct. 767 (2018).
    \143\ 15 U.S.C. 78u-6(a)(6).
    \144\ Digital Realty Trust, 138 S. Ct. at 781-82.
---------------------------------------------------------------------------

    In response to Digital Realty, proposed Rule 21F-2(a) provided a
uniform definition of whistleblower status to apply for all purposes
under Section 21F--award eligibility, confidentiality, and retaliation
protection--while tracking the ``whistleblower'' definition in Section
21F(a)(6). Accordingly, proposed Rule 21F-2(a) conferred whistleblower
status only on (i) an individual; (ii) who provides the Commission with
information ``in writing''; and only if (iii) ``the information relates
to a possible violation of the federal securities laws (including any
law, rule, or regulation subject to the jurisdiction of the Commission)
that has occurred, is ongoing, or is about to occur.''
    Proposed Rules 21F-2(b), (c), and (d) specified how the
whistleblower status conferred by paragraph (a) operates across the
various contexts of award eligibility, confidentiality, and retaliation
protection. Thus, proposed Rule 21F-2(b) specified that, to be eligible
for an award in a Commission action based on information provided to
the Commission, a person ``must comply with the procedures and the
conditions described in'' Rules 21F-4, 21F-8, and 21F-9. Likewise,
proposed Rule 21F-2(c) specified that, to qualify for confidentiality
protections afforded by Section 21F(h)(2) \145\ based on information
provided to the Commission, a person ``must comply with the procedures
and the conditions described in'' Rule 21F-9(a)--that is, must submit
information using the Commission's online portal or Form TCR.
---------------------------------------------------------------------------

    \145\ 15 U.S.C. 78u-6(h)(2).
---------------------------------------------------------------------------

    Proposed Rule 21F-2(d) sought to define the scope of retaliation
protection under Section 21F consistent with the Supreme Court's
holding in Digital Realty, by specifying both who is eligible for
protection as a whistleblower and also what conduct is protected from
employment retaliation.\146\ In explaining who is eligible for
retaliation protection, proposed Rule 21F-2(d)(1)(i) and (ii) required
that a person must ``qualify as a whistleblower under section (a)
before experiencing the retaliation'' for which redress is sought and
also must ``reasonably believe'' that the information provided to the
Commission relates to a possible securities law violation. In
explaining what conduct is protected from retaliation, proposed Rule
21F-2(d)(iii) required that a person must perform a ``lawful act'' that
both is done in connection with any of the activities described in
Section 21F(h)(1)(A)(i)-(iii)\147\ and also ``relate[s] to the subject
matter of'' the person's submission to the Commission under proposed
Rule 21F-2(a).
---------------------------------------------------------------------------

    \146\ See Digital Realty Trust, 138 S. Ct. at 777.
    \147\ 15 U.S.C. 78u-6(h)(1)(A)(i)-(iii).
---------------------------------------------------------------------------

    Proposed Rule 21F-2(d)(2) resolved a timing issue not addressed by
either the statute or the Digital Realty decision, by clarifying that a
person does not need to qualify as a whistleblower under Rule 21F-2(a)
at the time she or he performed the lawful act described in Rule 21F-
2(d)(1)(iii), in order to be eligible for retaliation protection;
rather, a person eligible for retaliation protection is protected from
retaliation for prior lawful acts when the alleged retaliatory conduct
occurs after the person qualifies as a whistleblower. Moreover,
proposed Rule 21F-2(d)(3) and (4) carried forward provisions of the
existing Rule 21F-2 without a substantive change. Paragraph (d)(3)
stated that retaliation protection applies regardless of whether a
person satisfies all the procedures and conditions to qualify for an
award. Paragraph (d)(4) stated that the retaliation prohibition in
Section 21F(h)(1) and the rules thereunder shall be enforceable in an
action or proceeding brought by the Commission.
2. Comments Received
    We received several comments addressing proposed Rule 21F-2's
definition of whistleblower status and the scope of retaliation
protection.\148\ Commenters generally acknowledged the need to revise
these aspects of the existing rule to conform to the Digital Realty
decision.\149\
---------------------------------------------------------------------------

    \148\ We did not receive any comments addressing the following
aspects of proposed Rule 21F-2: Limiting whistleblower status to
individuals, under proposed Rule 21F-2(a)(2); the clarification of
the phrase ``securities laws'' in Section 21F(a)(6), under proposed
Rule 21F-2(a)(1); defining award eligibility and confidentiality,
under proposed Rule 21F-2(b) and (c); extending retaliation
protection to a lawful act performed in connection with any of the
activities described in Section 21F(h)(1)(A)(i)-(iii), under
proposed Rule 21F-2(d)(1)(iii)(A); and providing that Section
21F(h)(1) and the rules thereunder shall be enforceable by the
Commission, under proposed Rule 21F-2(d)(4).
    \149\ See, e.g., CWC Letter; SIFMA Letter. But see joint letter
from National Employment Lawyers Association, Government
Accountability Project, and Public Citizen (Sept. 18, 2018) (``NELA
Letter'') (opposing proposed rule to the extent it went further than
required by Digital Realty); TAF Letter (endorsing comments from
NELA); letter from Anonymous-52 (Sept. 7, 2018) (arguing that the
Commission should challenge Digital Realty as wrongly decided).
---------------------------------------------------------------------------

    Commenters were divided on the proposal to require that a person
provide information ``in writing'' to the Commission in order to
qualify for whistleblower status under Rule 21F-2(a)(1). Two commenters
supported the ``in writing'' proposal. One suggested further requiring
that information be provided consistent with Rule 21F-9(a)--that is,
either on Form TCR or through the online portal--not only for award
eligibility and confidentiality, but also for retaliation
protection.\150\ The other recommended that the Commission make it a
practice to physically or electronically date-stamp every written
submission.\151\ One commenter opposed the ``in writing'' requirement
as too restrictive, since people may make oral reports out of a sense
of urgency or fear of retaliation, and since oral reports in the form
of interviews or testimony can still provide substantial assistance to
the Commission.\152\ Three joint commenters opposed the ``in writing''
requirement as not required by the text of Section 21F and as
inconsistent with the statute's remedial purpose, while observing that
Section 806 of Sarbanes-Oxley Act of 2002 (``Sarbanes-Oxley'') \153\
and the Fair Labor Standards Act (``FLSA'') \154\ have been construed
as affording protection to oral reports.\155\ These joint commenters
also asserted that, contrary to the justifications for this requirement
in the Proposing Release, committing oral reports to writing would not
pose a burden to the Commission's staff and there was no evidence that
past protections for oral reports under Sarbanes-Oxley Section 806 and
Exchange Act Section 21F had enmeshed the Commission's staff in
disputes in private retaliation lawsuits.\156\
---------------------------------------------------------------------------

    \150\ See CCMC Letter.
    \151\ See CWC Letter.
    \152\ See TAF Letter.
    \153\ 18 U.S.C. 1514A.
    \154\ 29 U.S.C. 215(a)(3).
    \155\ See NELA Letter.
    \156\ See id.
---------------------------------------------------------------------------

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

information to the Commission. One commenter argued against enumerating
any of the manners described in clause (ii) of Section 21F(h)(1)(A),
such as testimony, since this commenter agreed with the analysis in the
Proposing Release that clause (ii) is best read as extending employment
retaliation protection to acts of continued cooperation by a person who
has already provided information to the Commission.\157\ But other
commenters supported enumerating the manners described in clause (ii)
precisely because Section 21F lists them and because of the
Commission's interest in ensuring that persons can testify or otherwise
assist the Commission without reprisal.\158\
---------------------------------------------------------------------------

    \157\ See CWC Letter (citing Whistleblower Program Rules, 83 FR
34,702, 34,718 n.144 (July 20, 2018)).
    \158\ See NELA Letter.
---------------------------------------------------------------------------

    Commenters offered further feedback on the definition of
whistleblower status under proposed Rule 21F-2(a)(1). Some commenters
supported the extension of whistleblower status to persons who provide
information concerning ``possible'' violations of the federal
securities laws.\159\ Another commenter suggested excluding from
whistleblower status any individual who participated in wrongdoing, on
a theory of unclean hands.\160\
---------------------------------------------------------------------------

    \159\ See id.
    \160\ See CCMC Letter.
---------------------------------------------------------------------------

    Commenters took opposing views on whether an individual should be
required to report to the Commission before receiving retaliation
protection under proposed Rule 21F-2(d)(1). One commenter supported
this requirement as dictated by the Digital Realty decision and
observed the logical impossibility of ``commit[ting] retaliation
because of a protected activity that has not yet occurred.'' \161\
Three joint commenters believed, to the contrary, that this approach,
in combination with the proposed protection for ``lawful acts'' done
before the Commission report, would create a loophole by not protecting
those who report internally before approaching the Commission, thereby
incentivizing prompt firings for internal reports.\162\ These
commenters further believed this approach would encourage an employer
to argue that the employee was fired in retaliation for the internal
report rather than the report to the Commission.\163\ As an
alternative, these commenters proposed that the internal disclosure be
deemed an initial step in disclosing to the Commission, and that the
employer be required to forward the internal disclosure and its
response to the Commission.\164\
---------------------------------------------------------------------------

    \161\ See CWC Letter (emphasis in original).
    \162\ See NELA Letter.
    \163\ See id.
    \164\ See id.
---------------------------------------------------------------------------

    Three joint commenters supported the proposal to afford retaliation
protection, just as the current rule does, to persons who ``reasonably
believe'' that the information provided to the Commission concerns a
possible violation of the federal securities laws under proposed Rule
21F-2(d)(1)(ii).\165\
---------------------------------------------------------------------------

    \165\ See NELA Letter.
---------------------------------------------------------------------------

    Commenters disagreed with one another on the limitation under
proposed Rule 21F-2(d)(1)(iii)(B) that retaliation protection will
attach to a lawful act only if that act ``relate[s] to the subject
matter of your submission to the Commission under'' Rule 21F-2(a). One
commenter supported this ``subject matter'' limitation as embodying the
principle that the submission to the Commission establishes the
parameters of retaliation protection.\166\ Three joint commenters
opposed this limitation as not required by either the text of Section
21F or the Digital Realty decision and as injecting uncertainty as to
how close a nexus would be required between the lawful act and the
subject matter of the submission.\167\
---------------------------------------------------------------------------

    \166\ See CWC Letter.
    \167\ See NELA Letter.
---------------------------------------------------------------------------

    One commenter urged against the proposal to afford retaliation
protection, just as the current rule does, regardless of whether the
individual also satisfies the procedures and conditions for award
eligibility, under proposed Rule 21F-2(d)(3).\168\ This commenter
instead advocated for expressly treating the procedures and conditions
for award eligibility under Rules 21F-4, 21F-8, and 21F-9 as
prerequisites for retaliation protection.\169\
---------------------------------------------------------------------------

    \168\ See CCMC Letter.
    \169\ See id.
---------------------------------------------------------------------------

    Commenters were divided in responding to the request for comment
whether participation in internal compliance systems should continue to
be considered in determining the amount of an award, given the change
in retaliation protection resulting from the Digital Realty decision.
Two commenters \170\ as well as three joint commenters \171\ supported
retaining this factor in the award analysis. One commenter believed
that doing so would maintain the incentives for robust internal
compliance programs, which the commenter described as the first and
best line of defense against violations of the federal securities
laws.\172\ This commenter also suggested that the Commission consider
an explicit program that, in appropriate cases where an individual
bypasses internal compliance and goes directly to the Commission, would
allow the company to run its own internal investigation and report the
results before the Commission staff takes substantial investigative
steps.\173\ A second commenter similarly cited the benefits of internal
compliance programs for both employers and employees,\174\ while three
joint commenters suggested that the Commission should retain this award
factor while actively warning individuals about the limitations on
retaliation protection for internal disclosures.\175\
---------------------------------------------------------------------------

    \170\ See CWC Letter; SIFMA Letter.
    \171\ See NELA Letter.
    \172\ See SIFMA Letter.
    \173\ See id.
    \174\ See CWC Letter.
    \175\ See NELA Letter.
---------------------------------------------------------------------------

    Five commenters opposed keeping participation in internal
compliance systems as a consideration in determining the amount of an
award, reasoning that the Digital Realty decision leaves such reports
unprotected from retaliation.\176\ One commenter stated that it is
simply not practical to assume that individuals will always be able to
submit reports simultaneously to the Commission and to an internal
compliance program.\177\ Three commenters argued that any provisions to
encourage internal reports would be illegal in light of the Supreme
Court's recognition in Digital Realty that Congress designed Section
21F not to encourage internal reports but to encourage reports to the
Commission.\178\ These same three commenters further suggested that the
Commission clarify that the internal compliance programs addressed in
proposed Rule 21F-2 do not include internal investigations led by
company counsel and that the Commission eliminate existing Rule 21F-
4(b)(4)(iii), which generally requires certain employees in managerial,
compliance, and other positions as well as auditors to wait 120 days
before reporting to the Commission.\179\ On the elimination of Rule
21F-4(b)(4)(iii), these three commenters were joined by a fourth.\180\
---------------------------------------------------------------------------

    \176\ See letter from Anonymous-64 (Aug. 21, 2018) (``Anonymous-
64 Letter''); Sen. Grassley Letter; Kohn, Kohn & Colapinto July 24
Letter; Morrell Letter; TAF Letter.
    \177\ See Sen. Grassley Letter.
    \178\ See Anonymous-64 Letter; Kohn, Kohn & Colapinto July 24
Letter; Morrell Letter.
    \179\ See id.
    \180\ See Sen. Grassley Letter.
---------------------------------------------------------------------------

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

commenter endorsed enumerating ``downstream'' conduct such as
preventing a whistleblower from obtaining future employment,\181\ while
another commenter opposed doing so based on its assertion that the law
is less clear as to retaliation protection for future employment.\182\
Three joint commenters supported broadly construing the retaliation
prohibition to encompass any employment action that is reasonably
likely to deter employees from engaging in protected activity.\183\
---------------------------------------------------------------------------

    \181\ See TAF Letter.
    \182\ See CWC Letter (citing Dellinger v. Science Applications
Int'l Corp., 649 F.3d 226 (4th Cir. 2011)).
    \183\ See NELA Letter (citing Burlington N. & Santa Fe Rwy. Co.
v. White, 548 U.S. 53 (2006)).
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments, we are adopting Rule 21F-2 as
proposed, with the addition of interpretive guidance defining the scope
of retaliatory conduct prohibited by Section 21F(h)(1)(A). In addition,
in the Proposing Release we observed that proposed Rule 21F-2 would
render inapplicable the formal interpretation that the Commission
issued in 2015 regarding the meaning of Exchange Act Rule 21F-9. See 83
FR at 34718 n.193 (citing Interpretation of the SEC's Whistleblower
Rules under Section 21F of the Securities Exchange Act of 1934, 80 FR
47829 (Aug. 10, 2015)). That formal interpretation explained that
compliance with Exchange Act Rule 21F-9 was not required to qualify as
a whistleblower for purposes of Section 21F's employment retaliation
protections. See 80 FR at 47830. Because the Digital Realty decision
has since adopted a narrower reading of what is required to qualify as
a whistleblower for Section 21F's employment retaliation protections,
we now repeal that interpretive guidance as obsolete.
4. Whistleblower Status Under Rule 21F-2(a)
    Requiring information to be provided to the Commission ``in
writing'' as a condition of whistleblower status under Rule 21F-2(a)
appropriately addresses the interests of affording flexibility to
persons who report to the Commission and promoting reasonable certainty
and efficiency for the Commission, including for the Commission staff
who receive and process such reports. Were the rule to require that
such reports also comply with Rule 21F-9(a)--that is, that they be made
either on Form TCR or through the online portal--for retaliation
protection, as one commenter suggested,\184\ the burden to persons
making such reports would increase without any corresponding benefit.
As the Proposing Release explained, compliance with Rule 21F-9(a) is
required in other contexts because it allows precise and reliable
tracking of information for determining award eligibility as well as
for helping clarify which submitters should receive heightened
confidential treatment. There would be no similar benefit in the
retaliation context, however, where the key issue following Digital
Realty is not how the information was handled by the Commission's staff
but whether the information was provided to the Commission at all.\185\
---------------------------------------------------------------------------

    \184\ See CCMC Letter.
    \185\ As for the suggestion that the staff make it a practice to
date-stamp every written submission, see CWC Letter, we observe that
it is already the staff's practice to upload to the TCR System, upon
receipt, every written report of a possible securities law
violation. That system automatically generates an electronic record
of the date and time the corresponding TCR is created within the
system.
---------------------------------------------------------------------------

    Nor are we persuaded that the ``in writing'' requirement is too
onerous, as other commenters suggested.\186\ Our experience to date in
the awards context suggests that this requirement presents, at most, a
minimal burden to individuals who want to report potential securities
law violations to the Commission while facilitating the staff's use of
the information. To the degree that some individuals may face urgent
circumstances,\187\ the ``in writing'' requirement affords ample
flexibility in the means of transmission--for example, online
submission, email, facsimile, or U.S. Mail--to meet that urgency.
Moreover, given that Digital Realty has altered the legal landscape by
strictly limiting retaliation protection to persons who have reported
to the Commission, as distinct from persons who report internally, we
anticipate that direct reports to the Commission may increase, and so
protecting oral reports to the Commission could result in litigation
disputes about what information was orally provided and on what dates.
We decline the invitation of three joint commenters \188\ to
investigate how many such disputes arose in the past, since the Digital
Realty decision is likely to encourage more direct reports to the
Commission and thus any earlier data would likely have limited
predictive value under the post-Digital Realty regime.
---------------------------------------------------------------------------

    \186\ See, e.g., TAF Letter.
    \187\ See id.
    \188\ See NELA Letter.
---------------------------------------------------------------------------

    Nor is a contrary result required by judicial decisions finding
oral reports protected under Sarbanes-Oxley Section 806 and the FLSA,
since those decisions typically addressed oral reports made internally
to an employer who necessarily had a pre-existing employment
relationship with the complainant.\189\ Our rule, by contrast, must
preserve administrative efficiency and reliability while addressing
external reports to the Commission from members of the public
throughout the country and, indeed, across the globe.\190\ Exchange Act
Section 21F(a)(6) allows us discretion to determine the required
``manner'' of providing information, and we conclude that limiting
whistleblower status to reports made ``in writing'' is the better
programmatic approach for the reasons above.
---------------------------------------------------------------------------

    \189\ See id. (collecting cases). Indeed, the cited Supreme
Court decision addressing the FLSA did not extend retaliation
protection to all oral reports, but only to those oral reports
sufficient to give the employer fair notice that the employee was
making a complaint. See Kasten v. Saint-Gobain Performance Plastics
Corp., 563 U.S. 1, 11-14.
    \190\ See Office of the Whistleblower, 2018 Annual Report to
Congress 22-23 (2018) (documenting geographic dispersal of
whistleblowers throughout the United States and from 72 other
countries during fiscal year 2018).
---------------------------------------------------------------------------

    In addition to keeping the ``in writing'' requirement, we have
decided to adopt proposed Rule 21F-2(a) without specifying any other
``manners'' of providing information to the Commission. Although some
commenters suggested that we specify the additional conduct enumerated
in clause (ii) of Section 21F(h)(1)(A), such as testimony in an action
brought by the Commission, we adhere to our analysis of clause (ii) in
the Proposing Release. In particular, because clause (ii) refers to
``such information'' provided under the preceding clause (i), we
continue to believe that clause (ii) is more reasonably understood as
extending employment retaliation protection to acts of continued
cooperation by a person who has already provided information to the
Commission. And, as a practical matter, providing information to the
Commission in writing presents a minimal burden for any individual who
wants to receive retaliation protection under Section 21F for such acts
of continued cooperation.
    We have also declined the invitation of one commenter \191\ to
modify proposed Rule 21F-2(a) to exclude from whistleblower status any
individual who participated in wrongdoing. Nothing in the Digital
Realty decision, which is the impetus for the present revisions to Rule
21F-2, requires such an exclusion. Even were we writing on a blank
slate, we find it significant that Congress chose not to adopt such a
broad limitation on whistleblower status under Section 21F(a)(6), but
instead

chose the more narrow option of denying award eligibility under Section
21F(c)(2)(B) \192\ to ``any whistleblower who is convicted of a
criminal violation related to the [covered action] for which the
whistleblower otherwise could receive an award under this section.''
Based on our experience to date, moreover, existing Rule 21F-6(b)(1)
provides appropriate flexibility on a case-by-case basis for decreasing
an award based on a whistleblower's culpability.\193\
---------------------------------------------------------------------------

    \191\ See CCMC Letter.
    \192\ 15 U.S.C. 78u-6(c)(2)(B).
    \193\ Indeed, the Commission followed a similar analysis when it
declined suggestions to implement a per se exclusion for culpable
whistleblowers in our 2011 rulemaking. See Securities Whistleblower
Incentives and Protections, 76 FR 34300, 34350-51 (June 13, 2011).
---------------------------------------------------------------------------

5. Retaliation Protection Under Rule 21F-2(d)
    We are adopting Rule 21F-2(d)(1) as proposed to limit retaliation
protection to persons who qualify as whistleblowers by providing
information to the Commission before experiencing retaliation, as
expressly required by the Digital Realty decision.\194\ At the same
time, we are also adopting Rule 21F-2(d)(2) as proposed to extend
retaliation protection to lawful acts described in Exchange Act Section
21F(h)(1)(A) even if done before reporting to the Commission when the
retaliation takes place after a person qualifies as a ``whistleblower''
by providing information directly ``to the Commission'' consistent with
Section 21F(a)(6). We believe this interpretation is consistent with
the language of Section 21F(h)(1)(A).\195\ Although the net result is
to limit retaliation protection for persons who report internally
before reporting to the Commission,\196\ this outcome is driven by the
Supreme Court's holding that Section 21F distinguishes between ``who''
is protected as a whistleblower under Section 21F(a)(6) and ``what''
conduct is protected under Section 21F(h)(1)(A).\197\
---------------------------------------------------------------------------

    \194\ See Digital Realty Trust, 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).'').
    \195\ See Whistleblower Program Rules, 83 FR 34720 (July 20,
2018) (observing that the statute is silent on this timing issue).
    \196\ Cf. NELA Letter.
    \197\ See Digital Realty Trust, 138 S. Ct. at 777.
---------------------------------------------------------------------------

    The Supreme Court's holding forecloses the alternative suggested by
certain commenters \198\ that we require employers to forward all
internal reports to the Commission and that we therefore afford
retaliation protection to an employee's internal report as an ``initial
step'' in reporting to the Commission. Even under that suggested
regime, retaliation protection under Section 21F would not attach to a
person who reported only indirectly--by making an internal report that
was then forwarded by the employer to the Commission--until that same
person also qualified as a ``whistleblower'' by providing information
directly ``to the Commission'' consistent with Section 21F(a)(6).\199\
---------------------------------------------------------------------------

    \198\ See NELA Letter.
    \199\ Even where retaliation protection under Section 21F does
not attach, Sarbanes-Oxley Section 806 may still provide retaliation
protection for certain internal reports. See 18 U.S.C. 1514A.
---------------------------------------------------------------------------

    We are adopting Rule 21F-2(d)(1)(iii)(B) as proposed to state that
retaliation protection will attach to a lawful act performed by a
whistleblower only if the act ``relate[s] to the subject matter of''
the whistleblower's report to the Commission. Given Section 21F's
silence and the Supreme Court's decision not to address whether any
such connection should be required,\200\ ``we believe 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 . . . with respect to
distinct securities law violations that occur years later.'' \201\ This
provision thus helps effectuate what the Supreme Court recognized as
Congress's core objective of encouraging reports to the
Commission.\202\ Although some commenters expressed reservations about
the uncertainty this provision might generate for whistleblowers,\203\
we anticipate that this provision will be applied in a flexible manner
to accommodate whistleblowers who make a good-faith effort to comply
with our rules in seeking retaliation protection.
---------------------------------------------------------------------------

    \200\ See Digital Realty Trust, 138 S. Ct. at 780-81.
    \201\ See Whistleblower Program Rules, 83 FR 34720 n.168 (July
20, 2018).
    \202\ See Digital Realty Trust, 138 S. Ct. at 777.
    \203\ See NELA Letter.
---------------------------------------------------------------------------

    We are declining the invitation of one commenter \204\ to limit
retaliation protection strictly to persons who satisfy the procedures
and conditions for award eligibility under Rules 21F-4, 21F-8, and 21F-
9. Such a limitation would create significant and arbitrary hazards for
whistleblowers who typically would be unable to assess at the time they
report to the Commission, for example, whether their information is
``original'' under Rule 21F-4(b)(1)(ii) in the sense that it is not
already known to the Commission from any other source. The text,
history, and purposes of Section 21F do not indicate that such an
approach would be appropriate. To the contrary, that approach would
severely undermine the incentives for individuals to report potential
securities law violations to the Commission as intended by Congress.
---------------------------------------------------------------------------

    \204\ See CCMC Letter.
---------------------------------------------------------------------------

    On the scope of the retaliatory conduct prohibited by Section
21F(h)(1)(A), we agree with the commenter who asserted that the
decisional law is too uncertain to warrant revising Rule 21F-2 to
prohibit discrimination by an employer against a whistleblower who is
not currently employed, but rather seeking prospective employment.\205\
Accordingly, Rule 21F-2 as adopted remains silent on that question. At
the same time, we have determined to provide guidance, following the
Supreme Court's decision in Burlington Northern and Santa Fe Railway
Company v. White, that we interpret Section 21F(h)(1)(A) as prohibiting
any retaliatory activity by an employer against a whistleblower that
``a reasonable employee [would find] materially adverse,'' which means
``it well might have dissuade[d] a reasonable worker'' from engaging in
any lawful act encompassed by Section 21F(h)(1)(A).\206\ In particular,
we conclude that such a broad standard will promote greater ease of
administration than revising Rule 21F-2 to include a list of prohibited
forms of retaliation,\207\ which might inadvertently omit certain
retaliatory activities that otherwise would meet the Burlington
standard.
---------------------------------------------------------------------------

    \205\ See CWC Letter (citing Dellinger v. Science Applications
Int'l Corp. 649 F.3d 226 (4th Cir. 2011)). Much like the FLSA
retaliation provision at issue in Dellinger, see 649 F.3d at 228-30,
the language of Section 21F(h)(1)(A) focuses on employment
relationships without expressly encompassing prospective employers.
    \206\ 548 U.S. 53, 67-68 (2006) (internal quotation marks
omitted). In Burlington, the Supreme Court construed the phrase
``discriminate against'' in the retaliation provision of Title VII
of the Civil Rights Act of 1964. Id. at 57. That statute stated, in
relevant part, ``It shall be an unlawful employment practice for an
employer to discriminate against any of his employees or applicants
for employment'' because of their protected conduct. Id. at 62
(quoting 42 U.S.C. 2000e-3(a)) (internal quotation marks omitted).
Here, Section 21F(h)(1)(A) reads at least as broadly, ``No employer
may discharge, demote, suspend, threaten, harass, directly or
indirectly, or in any other manner discriminate against a
whistleblower'' because of the whistleblower's protected conduct. 15
U.S.C. 78u-6(h)(1)(A) (emphasis supplied). Given that both statutes
use the same phrase ``discriminate against,'' we expect that courts
will follow Burlington in construing the scope of retaliatory
conduct covered by Section 21F(h)(1)(A).
    \207\ Cf. NELA Letter.

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

6. Other Rules Addressing Internal Compliance
    In the Proposing Release, we solicited comment on whether, given
the change in retaliation protection following Digital Realty, it would
be appropriate to change the Commission's use of award criteria that
consider participation in internal compliance systems. As discussed
above, a number of commenters suggested it would be inappropriate or
even unlawful to retain such award criteria and Rule 21F-4(b)(4)(iii)
in light of the Supreme Court's interpretation of Section 21F as
conditioning retaliation protection on reporting to the Commission
rather than simply reporting internally.\208\ This interpretation is
inconsistent with both Digital Realty and Section 21F. As the Supreme
Court explained, Congress's enactment of Section 21F in the Dodd-Frank
Act in 2010 built upon its earlier enactment of Sarbanes-Oxley Section
806, which already afforded retaliation protection for certain internal
reports.\209\ Section 21F repealed neither Sarbanes-Oxley Section 806
nor any of the other provisions of the federal securities laws that
require or encourage the maintenance and use of internal compliance
systems for responding to possible violations of the federal securities
laws. Accordingly, we have implemented Section 21F in a way that does
not frustrate the design of these other statutes that Congress has
chosen to retain. To that end, it is appropriate to retain the
provisions in our whistleblower rules that help preserve the internal
compliance systems adopted under those other statutes.
---------------------------------------------------------------------------

    \208\ See Anonymous-64 Letter; Sen. Grassley Letter; Kohn, Kohn
& Colapinto July 24 Letter; Morrell Letter.
    \209\ See 138 S. Ct. at 773.
---------------------------------------------------------------------------

    Based on our review of the comments received, and in light of our
experience to date, we are retaining the award criteria, particularly
Rule 21F-6(a)(4) and (b)(3), that consider the whistleblower's
participation in or frustration of internal compliance systems when
determining the amount of an award. In particular, we are persuaded
that the possibility of an increased award under Rule 21F-6(a)(4)
remains an appropriate incentive for whistleblowers to use internal
compliance systems where available, while the possibility of a
decreased award under Rule 21F-6(b)(3) remains an appropriate deterrent
against acts to undermine such a system. Nothing in either of these
provisions will change the award analysis for a whistleblower who, out
of fear of reprisal or for any other reason, reports directly to the
Commission in order to secure retaliation protection under Section 21F.
In other words, we will not construe a direct report to the Commission,
made to secure retaliation protection under Section 21F, to constitute
an act that undermines an internal compliance system under Rule 21F-
6(b)(3).
    Based on these same considerations, we are retaining Rule 21F-
4(b)(4)(iii), which generally requires certain employees in managerial,
compliance, and other positions as well as auditors to wait 120 days
before reporting to the Commission, if they want their information to
be considered ``original'' for purposes of award eligibility. As we
explained in adopting this rule, ``we believe there are good policy
reasons to exclude information from consideration . . . where its use
in a whistleblower submission might undermine the proper operation of
internal compliance systems.'' \210\ In other words, repeal of this
rule could create incentives for such employees and auditors to report
potentially unlawful conduct to the Commission in hopes of an award
instead of fulfilling their professional responsibilities within those
internal compliance systems by internally reporting information and
allowing a reasonable response time.\211\ While these personnel will
lack retaliation protection under Section 21F until they report to the
Commission, this compromise is appropriate in light of the narrow
categories of personnel covered by Rule 21F-4(b)(4)(iii) and the need
to preserve the proper operation of internal compliance systems.
---------------------------------------------------------------------------

    \210\ Securities Whistleblower Incentives and Protections, 76 FR
34,300, 34,317 (June 13, 2011).
    \211\ See id. at 34,315-19.
---------------------------------------------------------------------------

    We are declining the suggestion of one commenter \212\ to adopt an
explicit program that, in appropriate cases where an individual
bypasses internal compliance and goes directly to the Commission, would
allow the company to run its own internal investigation and report the
results before the Commission staff takes substantial investigative
steps. The better approach in our view is to maintain the discretion of
the Division of Enforcement to decide how best to evaluate and
investigate potential violations, including the potential role of
internal investigations. We see no need in light of Digital Realty to
adopt a one-size-fits-all policy for all enforcement matters.\213\
---------------------------------------------------------------------------

    \212\ See SIFMA Letter.
    \213\ We also decline the suggestion of certain commenters to
clarify that the internal compliance programs addressed in proposed
Rule 21F-2 do not include internal investigations led by company
counsel. See Anonymous-64 Letter; Kohn, Kohn & Colapinto July 24
Letter; Morrell Letter. Rule 21F-2 itself does not refer to internal
compliance systems per se, and the suggested revision has nothing to
do with Digital Realty.
---------------------------------------------------------------------------

    To illustrate how Rule 21F-2 will 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 of 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 satisfy the relevant procedural requirements,
eligibility criteria, and other conditions described in Rules 21F-3
through 21F-18.

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

1. Proposed Rule
    Rule 21F-8 describes certain requirements that a whistleblower must
satisfy to be eligible for an award, including the form and manner in
which information is submitted to the Commission. The Commission
proposed to add a new paragraph (d) to provide the Commission with
additional

flexibility to change the forms it uses to administer the program. The
new subparagraph (d)(1) would allow the Commission to periodically
designate on its web page a revised Form TCR for individuals seeking to
submit original information to the Commission. Similarly, subparagraph
(d)(2) would allow the Commission to periodically designate a revised
Form WB-APP for individuals making a claim for an award.
2. Comments Received
    We received few comments on proposed Rule 21F-8(d). Two commenters
supported the proposed amendment,\214\ while others offered suggested
modifications.\215\ Two commenters suggested a thirty (30) day grace
period to allow a potential whistleblower to use the prior version of
each form before a revised version is posted to the Commission
website.\216\ One commenter suggested that forms be amended at most
once per year,\217\ while another commenter recommended that the
Commission add a section to address the seven factors affecting an
award determination.\218\
---------------------------------------------------------------------------

    \214\ See Think Computer Letter; TAF Letter.
    \215\ See CCMC Letter; TAF Letter.
    \216\ Id.
    \217\ See Think Computer Letter.
    \218\ See letter from Anonymous-24 (Sept. 15, 2018).
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments, we are adopting Rule 21F-8(d) as
proposed with a slight modification. We agree that it is reasonable to
allow a whistleblower to continue to use the superseded versions of the
Form TCR and Form WB-APP for a 30-day period following the public
release of each revised form. This modification would be reflected in a
new sentence added to Proposed Rule 21F-8(a).
    While we considered the remaining suggested modifications, they are
not reflected in the final rule. One of the goals of the proposal is to
ensure that the information the Commission requests in the Form TCR
conforms to the information that the Commission requests through the
online portal. Permitting the Form TCR to be changed only once a year
would run the risk of soliciting asymmetrical information through the
two submission methods which would undermine the purpose of the
proposed Rule 21F-8(d).
    Finally, we are not persuaded that Form TCR should be amended to
include a section for the seven factors for determining the amount of
an award as described in Rule 21F-6(a) and 21F-6(b). The Form WB-APP
asks an individual to explain the basis for the Award Amount that the
individual is seeking. To that end, an applicant is permitted to
include supporting documents and to attach additional pages to the Form
WB-APP. In our experience implementing the program, most claimants
already use this opportunity to supplement their award application.

J. Rule 21F-8(e) and a Clarifying Amendment to Rule 21F-8(c)(7)--Abuse
of Award Application Process or Submission of False Information in
Connection With the Whistleblower Program and Certain Other Dealings
With the Commission

1. Proposed Rule
    Proposed Rule 21F-8(e)(1) would authorize the Commission to
permanently bar an individual who submits three or more award
applications that are frivolous or lack a colorable connection between
the tip and the action. The proposed rule would also authorize the
Commission to bar an individual who has been deemed ineligible for an
award pursuant to paragraph (c)(7) of Rule 21F-8 for knowingly and
willfully making false statements to the Commission or another
governmental entity.
    Further, paragraph (e)(2) would require the Office of the
Whistleblower to notify the claimant of its assessment that the award
application is frivolous or lacks a colorable connection to the action,
and give the claimant the opportunity to withdraw the application
before a Preliminary Determination or Preliminary Disposition
recommending a bar is issued. If a bar is recommended, the applicant
would have an opportunity to submit a response in accordance with the
award processing procedures specified in Rule 21F-10(e)(2) and Rule
21F-18(b)(3).
2. Comments Received
    Nearly all commenters supported the proposed rule.\219\ Many shared
our concern that frivolous award applications divert the Commission's
limited resources and threaten the effective and efficient operation of
the program.\220\ Some commenters suggested imposing a permanent bar
after an individual has submitted one \221\ or two \222\ frivolous
applications. However, one commenter suggested that the bar should
apply only to claimants who filed three frivolous award applications in
one year.\223\
---------------------------------------------------------------------------

    \219\ See SIFMA Letter; CWC Letter; Cohen Milstein Letter;
Markopolos Letter; Think Computer Letter; TAF Letter; Anonymous-9
Letter; Sen. Grassley Letter; letter from Anonymous-33 (Sept. 14,
2018); CCMC Letter.
    \220\ See CCMC Letter; SIFMA Letter; Cohen Milstein Letter.
    \221\ See Markopolos Letter.
    \222\ See TAF Letter.
    \223\ See Think Computer Letter.
---------------------------------------------------------------------------

    Some commenters--while supporting the proposed rule--raised
concerns about the timing and frequency of the process for withdrawing
a frivolous application. One commenter stated that the time period
between when the Office of the Whistleblower advises a claimant that a
claim is considered frivolous and when the claimant actually withdraws
the claim should take no more than fifteen days.\224\ Another commenter
recommended that claimants not be given unlimited opportunities to
withdraw an application that has initially been deemed frivolous.
Instead, the claimant should be able to withdraw only the first
frivolous claim, after which any other frivolous claim would count
toward the three without an opportunity to withdraw it.\225\
---------------------------------------------------------------------------

    \224\ See Think Computer Letter.
    \225\ See Anonymous-9 Letter.
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3. Final Rules
    After considering the comments, we are adopting Rule 21F-8(e)
substantially as proposed with three modifications.
    First, the notice provision and opportunity to withdraw
applications that are frivolous or lack a colorable connection to the
matter will apply only to the initial three such applications reviewed
by the Office of the Whistleblower.\226\ We agree with the commenter
who suggested that claimants should not be provided an unlimited
opportunity to withdraw award applications that might be subject to a
bar and believe that limiting this opportunity to three such
applications after the claimant receives a preliminary notification
from the Office of the Whistleblower about the application's frivolous
nature is the appropriate approach.
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    \226\ We have also clarified that a claimant will have only 30
days from the date of the notification by the Office of the
Whistleblower to provide that Office with notice that the
application has been withdrawn. Failure to provide timely notice
will result in the application being considered for purposes of a
potential bar. For purposes of determining whether a bar should be
imposed under this rule, claimants will not be permitted to withdraw
their application (1) after the 30-day period to withdraw has run
following notice from the Office of the Whistleblower with respect
to the initial three applications assessed by that Office to be
frivolous, or (2) after a Preliminary Determination or Preliminary
Disposition has issued in connection with any other frivolous
application.
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    Second, the final rule includes a new paragraph (e)(4) that
addresses pending

award applications.\227\ The rule codifies the Commission's existing
practice of barring applicants who submit materially false, fictitious,
or fraudulent statements in their dealings with the Commission \228\
and provides an important new tool for the Commission in processing
frivolous award applications.\229\ As the Proposing Release explained,
these applications consume a disproportionate amount of staff resources
that could otherwise be dedicated to analyzing potentially meritorious
award applications.\230\
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    \227\ Additionally, proposed paragraph (e)(2) has been broken
into separate paragraphs (e)(2) and (e)(3) with minor modifications
in phrasing.
    \228\ See May 12, 2014 and August 5, 2015 Commission Final
Orders finding two serial filers ineligible for awards pursuant to
Rule 21F-8(c)(7) of the Exchange Act because of a materially false,
fictitious, and fraudulent statements made in their respective
dealings with the Commission.
    \229\ Frivolous claims are those that lack any reasonable or
plausible connection to the covered or related action.
    \230\ As an example of the delays and inefficiencies that a
frivolous award claim may introduce, see generally Final Order of
the Commission (May 12, 2014) (available at https://www.sec.gov/about/offices/owb/orders/owb-multiple-final-051214.pdf) (explaining
that, in barring a frivolous award claimant, the claimant had
consumed considerable staff effort with ``frivolous claims and
caused a delay in the Commission's ability to make a final
determination to the three legitimate whistleblowers'' in the
particular matter and also noting the ``time and effort OWB staff
expended to prepare the administrative record and other materials
for an additional 51 claims'').
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    Third, we are adding clarifying language to Rule 21F-8(c)(7) to
address the circumstances under which Rule 21F-8(c)(7), and by
extension the bar, will apply. As adopted, the rule provides that
individuals who have violated Rule 21F-8(c)(7) may be permanently
barred from making future whistleblower award applications or otherwise
participating in the program.\231\ To clarify the standard to be
applied, the additional language will provide that 21F-8(c)(7) will
apply, in the context of the eligibility of a whistleblower and by
extension in the context of the new authority to bar an applicant, only
where there has been a finding by the Commission or a court of
competent jurisdiction that the individual provided materially false,
fictitious, or fraudulent representations, statements, or documents.
After considering the programmatic interests underlying the rule, we
are also clarifying that the disqualification from eligibility in Rule
21F-8(c)(7), and by extension the permanent bar in Rule 21F-8(e), will
not apply where the Commission, in its discretion, determines that
refraining from finding a violation of Rule 21F-8(c)(7) is consistent
with the public interest, the promotion of investor protection, and the
objectives of the whistleblower program.
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    \231\ If such a bar is issued, it will apply to any other award
applications from the claimant without any assessment by the
Commission of the merits of those other award applications.
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    In addition, we are adding clarifying language to address which
dealings with the Commission will be considered when applying the rule.
While we expect that the Commission will impose a bar based upon a
violation of 21F-8(c)(7) primarily in situations where there is a
finding that an individual has provided materially false information in
some way connected to the whistleblower program, the Proposing Release
stated that the proposed rule would also apply to ``false, fictitious,
or fraudulent representations, statements, or documents beyond those
made in connection with an award determination.'' We continue to
believe this is appropriate grounds on which to impose a bar and we are
adding clarifying language to Rule 21F-8(c)(7) to provide that the
dealings include ``dealings beyond the whistleblower program and
covered action.'' For example, there may be situations where an
individual's untruthful conduct in connection with the Commission
(albeit outside a context associated with the whistleblower program or
the covered action) may be sufficiently egregious or harmful, such that
the Commission should have the ability to deem the individual's actions
a violation of Rule 21F-8(c)(7) and deny a monetary award to such an
individual under Section 21F and potentially bar the individual from
future whistleblower applications or from otherwise participating in
the program.\232\ In light of the clarifying language noted further
above, however, we expect there to be certain situations in which the
Commission finds it in the public interest not to apply a
disqualification or bar. The clarifying provisos to Rule 21F-8(c)(7)
reflect this balanced approach.
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    \232\ The Commission does not intend that in assessing a
whistleblower's eligibility, and by extension the potential
application of the bar, there will be an inquiry into the
whistleblower's prior dealings with the Commission to ensure that
the individual did not engage in any misconduct covered by the
exclusion provided for in Rule 21F-8(c)(7). Rather, the Commission
anticipates that it will only utilize this rule to determine that a
whistleblower is ineligible for the individual's ``other dealings
with the Commission'' if the Commission has previously made (or
otherwise learns of) a prior finding of material misconduct.
Further, to the extent that the misconduct covered by this rule may
occur in a judicial or administrative enforcement proceeding, the
Commission in applying this rule will as a general matter deem a
whistleblower ineligible only if there was an express finding during
the course of that judicial or administrative enforcement
proceeding, or in a related proceeding, that the individual
willfully made the sort of materially false, fictitious, or
fraudulent statement covered by the rule.
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    We believe that focusing our authority to impose a bar in the
limited the situations described above will discourage individuals
from, in an effort to mislead or hinder the Commission or other
governmental entity, (i) knowingly or willfully making materially
false, fictitious, or fraudulent statements or representations, or (ii)
using any false writing or document knowing the writings or documents
contain materially false, fictitious, or fraudulent statements or
information.
    Turning to the procedural aspects of the new rule, Rule 21F-8(e)
provides in paragraph (e)(2) that the Preliminary Determination or
Preliminary Summary Disposition generally must inform the claimant that
a permanent bar is being considered, in order to afford the claimant an
opportunity to submit a response in accordance with the claims review
procedures in Rules 21F-10(e)(2) and 21F-18(b)(3). We have added a
sentence to paragraph (e)(2) to clarify that, if the basis for a bar
arises or is discovered after the issuance of the Preliminary
Determination or Preliminary Summary Disposition, then the Office of
the Whistleblower must notify the claimant and afford the claimant an
opportunity to submit a response before the Commission determines
whether to issue a bar. This procedure will give the claimant notice
and an opportunity to be heard before the issuance of a permanent bar
where, for example, the claimant makes a false statement or submits a
fictitious document in response to the Preliminary Determination or
Preliminary Summary Disposition.
    Finally, the new paragraph (e)(4) explains that Rule 21F-8(e)
applies to all award applications pending as of the effective date of
these rules, but the Office of the Whistleblower must advise claimants,
prior to a Preliminary Determination or Preliminary Summary
Disposition, of any assessment by that Office that the conditions for
issuing a bar are satisfied because of a frivolous claim or a false or
fictitious statement or document submitted prior to the effective date.
If the claimant withdraws the relevant award application(s) within 30
days of receiving notice from the Office of the Whistleblower, then the
Commission will not consider the withdrawn award application(s) in
determining whether to impose a permanent bar. This approach strikes an
appropriate balance between the need to process pending award
applications efficiently and the need to provide fair notice to
claimants of the possible consequences should they refuse to

withdraw an award application made prior to the effective date of these
rules.

K. Rule 21F-9--Procedures for Submitting Original Information

1. Proposed Rule
    Current Rule 21F-9 describes the procedures for submitting original
information to the Commission. The Commission proposed to amend Rule
21F-9(a) to clarify that an individual must use certain prescribed
submission methods to qualify for an award and/or confidentiality
protections under Rule 21F-2(b) and (c). As proposed, an individual
would have to submit information to the Commission by one of three
methods: (1) Online, through the Commission's electronic TCR portal;
(2) by mailing or faxing a Form TCR to the 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 such method that the
Commission may expressly designate on its website.
    We also proposed new paragraph 9(e), which would clarify that the
first time an individual provides information to the Commission that
the individual will rely upon as a basis for a claim, the individual
must have provided the information in accordance with Rule 21F-9(a) and
(b).\233\ Currently our rules do not provide any established mechanism
to permit individuals who fail to comply with the TCR requirement
(including the requirement to provide a signed declaration) to qualify
for an award with respect to information they provide to the Commission
prior to filing a TCR (and signed declaration). However, proposed
paragraph 9(e) provided the Commission with new authority to waive
compliance with paragraphs (a) and (b) when the Commission determines
that the administrative record ``clearly and convincingly''
demonstrates that the individual would otherwise qualify for an award
and the individual shows that he or she complied with paragraphs (a)
and (b) within 30 days of communicating with the staff.
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    \233\ Many of the comments that the Commission received on this
portion of the rule seem to have believed that this rule would
impose a new obligation on potential whistleblowers. It did not.
Rather, this portion of the proposed rule merely codified the
Commission's existing interpretation of its current rules; indeed,
this portion of the proposed rule was fully consistent with how the
Commission has interpreted and applied its current whistleblower
rules since those rules were promulgated in 2011. See, e.g., In the
Matter of the Claims for Award in Connection with a Notice of
Covered Action, Exchange Act Release No. 34-83689, 2018 WL 3546251
(July 23, 2018); In the Matter of the Claims for Award in Connection
with a Notice of Covered Action, Exchange Act Release No. 34-82181,
2017 WL 5969236 (Nov. 30, 2017). Further, the proposal was
consistent with Section 21F in which Congress directed that
individuals may obtain an award only if they follow the form and
manner prescribed by the Commission for submitting information;
failure to do so under the statute means that an individual will be
ineligible for an award. See 15 U.S.C. 78u-6(a)(6) (requiring that
to qualify as a whistleblower information must be ``provide[d] . . .
in a manner established'' by the Commission's rules); id. 78u-
6(c)(2)(D) (directing that ``[n]o award . . . shall be made . . . to
any whistleblower who fails to submit information to the Commission
in such form as the Commission may, by rule, require''). The
important change that was reflected in this proposed rule was the
30-day period in which the Commission could waive an untimely
failure to comply with the rule; thus, the changes proposed by this
rule were intended to benefit potential whistleblowers by
potentially granting relief to them in certain circumstances where
they have failed to adhere to the procedural requirements for
submitting information and this proposed rule in no way reflected
any new obligation on individuals receiving an award.
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2. Comments Received
    We received several comments that addressed proposed amendments to
paragraph (a) of Rule 21F-9. Two commenters supported the
proposal.\234\ One of those commenters supported proposed paragraph
21F-9(a) as long as the SEC has a process in place to address technical
security issues with the TCR portal that the public may identify.\235\
Another commenter, while not clearly supporting or opposing the
proposal, suggested permitting filing of the Form TCR by email.\236\
---------------------------------------------------------------------------

    \234\ See Think Computer Letter; CCMC Letter.
    \235\ See Think Computer Letter.
    \236\ See letter from Liam Foster (Sept. 18, 2018).
---------------------------------------------------------------------------

    With respect to proposed paragraph (e), the Commission received
numerous copies of a form letter that stated the proposed rule language
``would create unrealistic reporting procedures that would disqualify a
vast number of whistleblowers, simply because they reported their
concerns to the wrong office at the SEC, rather than filling out a
specific form and filing it according to specific reporting
procedures.'' \237\ Beyond these form letters, the Commission received
a number of unique comments from the public. One commenter generally
supported the proposal, asserting that it would bring greater clarity
to the parameters for obtaining an award, but this commenter opposed
the exception granting the Commission discretion to waive some criteria
on the ground that it could open the agency to endless waiver requests
from ``bad actors.'' \238\
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    \237\ Form Letter C.
    \238\ See CCMC Letter.
---------------------------------------------------------------------------

    Several other commenters raised broader concerns with proposed
paragraph (e).\239\ One commenter stated that proposed paragraph 9(e)
would render a whistleblower who ``contacts anyone at the SEC without
first having a filed a TCR . . . automatically ineligible for an
award.'' \240\ Another commenter stated that proposed Rule 21F-9(e)
thwarted congressional intent by limiting the types of information for
which an individual can claim whistleblower credit.\241\ This commenter
also asserted that the Commission may use a whistleblower's information
well before the whistleblower knows the information was helpful and
recommended that any restriction on the time for filing a compliant TCR
be tied to the latest date on which the individual could reasonably be
aware that (1) the individual's information assisted the Commission,
and (2) the individual may therefore be eligible for an award.\242\
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    \239\ See Anonymous-9 Letter; letter from Kohn, Kohn & Colapinto
(May 6, 2019) (``Kohn, Kohn & Colapinto May 6 Letter'').
    \240\ See Kohn, Kohn, & Colapinto May 6 Letter.
    \241\ See TAF Letter.
    \242\ Id.
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    Some commenters thought the proposal did not reflect the day-to-day
practice in which potential whistleblowers directly contact Commission
staff with information about suspected securities law violations. One
commenter asserted that SEC staff has welcomed direct contact with the
public and that when a matter is time sensitive these interactions can
allow the SEC employees to act quickly without waiting for the TCR
system to review any pertinent information.\243\ The commenter
suggested that excluding such communications from consideration in an
award determination would discourage individuals from providing
information through the most expedient channels.\244\
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    \243\ See Anonymous-9 Letter.
    \244\ Id.
---------------------------------------------------------------------------

    One commenter expressed concern that the paragraph 9(e) exception
for noncompliance with paragraphs 9(a) and 9(b) placed ``strict
limits'' on the Commission's ability to grant waivers because ``the
whistleblower must meet a high standard that the information they
provided resulted in the enforcement action . . .'' and must do so by
``clear and convincing evidence.'' \245\ The same commenter suggested
that the proposed exception actually limited the Commission's ability
to use its general exemptive authority.\246\ The commenter also
suggested that the Commission could use its discretionary authority
under Rule 9(e) to reduce a whistleblower's award to 10 percent and the
whistleblower ``would have no

recourse or appeal.'' \247\ And that commenter suggested that because
the Commission's web page provides ``numerous methods'' to contact the
agency about potential securities-law violations or related issues,
this may result in individuals initially reporting information to the
Commission in a manner that results in an eventual disqualification
from receiving an award.\248\ Finally, several commenters suggested
that the Commission should establish a ``good cause'' exception that
would excuse an individual's non-compliance with the TCR and
declaration requirements of Rule 21F-9 in any situation where the
individual would otherwise qualify as a meritorious whistleblower.\249\
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    \245\ See Kohn, Kohn, & Colapinto May 6 Letter.
    \246\ Id.
    \247\ Id.
    \248\ See letter from Kohn, Kohn, & Colapinto (Oct. 16, 2019)
(``Kohn, Kohn & Colapinto Oct. 16 Letter'').
    \249\ See letter from Kohn, Kohn, & Colapinto (Oct. 21, 2019)
(``Kohn, Kohn & Colapinto Oct. 21 Letter''); letter from Phillips &
Cohen LLP (Oct. 25, 2019) (``Phillips & Cohen Letter).
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3. Final Rule
    After considering the comments, we are adopting the final rule as
proposed with several important substantive modifications to paragraph
(e). First, we are clarifying that an individual need not in the first
instance provide original information to the Commission in accordance
with the procedures in Rule 21F-9(a) and (b), but may instead provide
original information in a different manner, provided that the
individual complies with Rule 21F-9(a) and (b) within 30 days of first
providing that original information. Second, we are permitting an
individual who fails to satisfy these procedural requirements to
qualify for a waiver if the individual can demonstrate that he or she
complied with Rule 21F-9(a) and (b) within 30 days of first learning
about the requirements. Third, we are making this waiver automatic when
the criteria specified in the rule are satisfied. Fourth, we have
revised the language of the proposed rule to require that the
Commission must be able to ``readily'' determine that the
administrative record ``unambiguously''--rather than ``clearly and
convincingly''--demonstrates that the claimant would otherwise qualify
for an award in order for us to grant a waiver of noncompliance.\250\
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    \250\ We are also making the discretionary safe harbor provided
by Rule 21F-9(e) effective as to all award claims still pending on
the effective date of the rules. We believe that doing so is
appropriate as we think that all claimants--not just future
whistleblowers--should be able to benefit from this new mechanism.
---------------------------------------------------------------------------

    Since the whistleblower rules were implemented in 2011, the
Commission has required any individual seeking an award and/or the
confidentiality protections of the program to submit a tip through the
Commission's online portal or by submitting a Form-TCR by mail or
fax.\251\ The requirement to file a TCR has been a necessary initial
step for an individual to obtain treatment as a ``whistleblower'' under
our rules \252\ and, in our experience, has proved beneficial to the
effective administration of our whistleblower program. Accordingly, the
Commission has treated the failure to file a properly executed TCR as
grounds for denial of a claim for award.\253\ Thus, paragraph 9(e) as
proposed would not have created a new obligation for potential
whistleblowers; rather, it was intended to clarify the Commission's
existing approach when making award determinations--when an individual
provides information to the Commission that he or she will rely upon as
a basis for claiming an award, the information should be provided
initially in accordance with Rule 21F-9(a) and (b). We view this
clarification of the importance of the Commission's TCR-filing
requirement as merely a codification of current practice--i.e.,
whistleblowers must comply with the procedures for submitting their
information in order to later be eligible for a potential award.
Moreover, the Commission's experience with the program to date
demonstrates in our view that the procedures for submitting information
to the Commission to qualify for an award--including those specified in
Rule 21F-9(e)--do not create unrealistic or onerous reporting
procedures for potential whistleblowers and that any burdens on the
public are outweighed by the administrative efficiencies to the program
and the agency.
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    \251\ Rule 21F-9(a), (b).
    \252\ Under Rule 21F-2, as amended, a TCR filing remains
necessary to obtain whistleblower confidentiality protections and
award eligibility.
    \253\ See, e.g., In the Matter of the Claims for Award in
Connection with a Notice of Covered Action, Exchange Act Release No.
34-82181, 2017 WL 5969236 (Nov. 30, 2017) (denying two claimants, in
part, on the ground that they had failed to submit their original
information to the Commission in the form and manner required to
qualify as a whistleblower).
---------------------------------------------------------------------------

    That said, we have not applied these procedural requirements
rigidly and have through our practice permitted whistleblowers to
``perfect'' their submissions of original information by complying with
the requirements of Rule 21F-9(a) and (b) for a brief period of time
from the date they first provide the information to the Commission.
This practice of permitting individuals to perfect their submission has
grown out of our recognition of the practical realities of how
whistleblowers or their counsel may first relay information to the
Commission. Based on our historical practice, and our consideration of
the comments that we have received on proposed paragraph (e), we have
modified the rule to expressly provide that an individual's first
contact with the Commission need not be in the form of a TCR with an
accompanying declaration. Rather, to qualify for a potential award
under the rule we are adopting, an individual need only submit the TCR
and declaration within 30 days of first providing that information to
the Commission. As modified from the proposed rule, paragraph (e) now
fully captures the current practice that we have found both beneficial
to the agency's administration of the program and practicable for
individuals to follow without imposing unnecessary burdens on them.
    We view the new express waiver authority as an important mechanism
to protect the ability of these individuals to obtain an award
notwithstanding their untimely compliance with Rule 21F-9(a) and (b).
Specifically, the new express waiver authority will permit an otherwise
clearly meritorious whistleblower who failed to comply with Rule 21F-
9(a) and (b) within 30 days of first providing original information to
the Commission to nonetheless obtain an award provided that the
individual complied with those requirements within 30 days of first
learning of them and the Commission can readily develop an
administrative record that unambiguously demonstrates that the
individual would otherwise merit an award, without a significant
expenditure of staff time and resources to do so. Significantly, our
rules currently do not provide any established mechanism to permit
individuals who fail to comply with the TCR requirement (including the
requirement to provide a signed declaration) to qualify for an award
with respect to information they provide to the Commission prior to
filing a TCR (and signed declaration). New Rule 21F-9(e) now provides
that mechanism. In determining whether the new waiver authority
applies, the Commission will consider that any whistleblower
represented by counsel has constructive notice \254\ of the
requirements of Rule

21F-9(a) and (b) as of the date counsel was retained.
---------------------------------------------------------------------------

    \254\ Constructive notice is generally defined as ``[n]otice
arising by presumption of law from the existence of facts and
circumstances that a party had a duty to take notice of.'' Black's
Law Dictionary (10th ed. 2014).
---------------------------------------------------------------------------

    Although we recognize that some commenters have challenged the
long-standing requirement that whistleblowers should file their
original information on a TCR in order to obtain an award based on that
information, the policy grounds for this requirement are sound. The
Commission has strived to ensure that (1) all TCRs are collected in one
central place; (2) the TCR data is combined with other public and
confidential information on the persons and entities identified in the
TCRs, and (3) investigative resources are dedicated to the TCRs
presenting the greatest threat of investor harm. We understand that
some whistleblowers may choose to contact staff directly to share
information about a suspected violation of the securities laws.
However, we do not view such outreach as satisfying or obviating the
requirement to file a TCR. Indeed, there are important reasons for
requiring the timely submission of a TCR (and an accompanying
declaration) which benefit both the whistleblower and the Commission's
programmatic interests.
    First, these requirements ensure that the agency has an accurate
record of the information a potential whistleblower deems important to
the Commission's enforcement efforts instead of relying on Commission
staff to file a TCR summarizing the individual's information. Without
this safeguard, disputes may arise as to what information an individual
actually provided in the initial contact with Commission staff and when
the information was submitted to the TCR system. Second, the
requirement to file a TCR at the outset of the information-sharing
process provides a clear indication to staff that the submitter is
seeking the heightened confidentiality protections that are afforded by
Section 21F(h)(2) of the Exchange Act; \255\ it is important that
submitters make this clear up front in this manner because it alerts
the staff about the extent to which it may (or may not) reveal the
submitter's information to third parties, including other government
agencies, and it also determines whether other government agencies are
themselves subject to the heightened confidentiality requirements of
Section 21F(h)(2).\256\ Third, the TCR requirement memorializes the
timing of a whistleblower's provision of information, which is
especially important if a subsequent whistleblower provides similar
information or if the whistleblower seeks the program's confidentiality
and/or retaliation protections. Fourth, the TCR requirement allows the
Commission to manage and track ``the thousands of tips that it receives
annually and to connect tips to each other so as to make better use of
the information provided . . .'' \257\ The accompanying declaration
requirement helps deter individuals from submitting false tips that
result in the inefficient use of the Commission's resources.\258\ We
find it significant that Section 21F provides that an individual
``shall'' be denied an award if he or she fails to submit information
to the Commission in the form and manner required--a strong signal of
congressional intent that individuals seeking an award must follow the
procedures that the Commission establishes for submitting
information.\259\
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    \255\ 15 U.S.C. 78u-6(h)(2).
    \256\ For example, if a submitter fails to provide information
on a TCR and the staff shares it with the another government agency
before the TCR is submitted, that agency will not be subject to the
confidentiality requirements of Section 21F(h)(2) and this may lead
to the disclosure of the submitter's identity. Filing the TCR as
part of the initial information-sharing means that the legal
protections of Section 21F(h)(2) will apply if the Commission shares
the submitter's information with the other agency.
    \257\ See Proposed Rules for Implementing the Whistleblower
Provisions of Section 21F of the Securities Exchange Act of 1934, 75
FR 70,502 (November 17, 2010).
    \258\ Id.
    \259\ See 15 U.S.C. 78u-6(c)(2)(D).
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    Notwithstanding the foregoing, the changes that we have expressly
incorporated into paragraph (e) will afford an opportunity for
individuals who first come to the Commission with original information
without complying with Rule 21F-9(a) and (b) to perfect their
submissions and thus potentially qualify for an award. Specifically, in
those instances when an individual first provides information to the
Commission without complying with Rule 21F-9(a) and 9(b), the following
mechanisms will now be available: (1) The individual can perfect his or
her submission by complying with those rules within 30 days of first
providing original information to the Commission; \260\ (2) after 30
days of first providing original information to the Commission, the
individual may still qualify for a waiver from having failed to timely
comply with Rule 21F-9(a) and (b) if the individual can demonstrate
that he or she complied with these procedural requirements within 30
days of first learning about them \261\ and the Commission can readily
develop an administrative record that unambiguously demonstrates that
the individual would otherwise merit an award, without a significant
expenditure of staff time and resources to do so. As compared with the
proposed rule, we have determined to make the waiver of non-compliance
with Rule 21F-9(a) and (b) automatic, rather than discretionary, when
the Commission finds that the whistleblower has established that the
conditions for the waiver are satisfied. Further, we have determined to
provide for such a waiver opportunity from the time when the individual
first learns of the Rule 21F-9(a) and (b) requirements rather than
establishing a fixed deadline calculated from when the original
information is first submitted.
---------------------------------------------------------------------------

    \260\ As noted in the Proposing Release, even if the individual
does not satisfy the procedural requirements within the 30-day safe
harbor, he or she may remain award-eligible for any new information
that is submitted later in accordance with the Rule 21F-9
procedures. See Proposing Release note 195. For example, in our
experience, whistleblowers frequently share information and insights
with the Enforcement staff in a series of communications over time.
Such contacts may range from formal interviews, meetings, or even
sworn testimony to more informal contacts such as email exchanges.
To date, the Commission has employed a flexible approach in
whistleblower awards to treat individuals as award-eligible for any
new information submitted after the individual has complied with the
TCR-filing requirement, and we expect to continue that practice
under new Rule 21F-9(e). See In the Matter of the Claim for Award,
Exchange Act Release No. 34-78025, 2016 WL 3194294 (June 9, 2016).
    \261\ Such a demonstration will require a sworn declaration or
other supporting materials satisfactory to the Commission. We note
that the Office of the Whistleblower makes clear on its web page
that, to qualify for an award, an individual must submit information
regarding possible law violations to the Commission in one of two
ways: (1) Submitting a tip electronically through the SEC's Tips,
Complaints and Referrals Portal, or (2) mailing or faxing a Form TCR
to the SEC. See https://www.sec.gov/whistleblower/submit-a-tip. In
determining whether the new waiver authority applies, the Commission
will consider that any whistleblower represented by counsel has
constructive notice of the requirements of Rule 21F-9(a) and (b) as
of the date counsel was retained. Further, if staff advises an
individual to review the whistleblower website or to otherwise
obtain information about the whistleblower program, the Commission
may under the particular facts and circumstances consider the
individual to have received constructive notice as of the date the
staff communicated this information to the individual.
---------------------------------------------------------------------------

    Based on the suggestion of a commenter, we have eliminated the
phrase ``clearly and convincingly'' and replaced it with the terms
``readily'' and ``unambiguously'' in order to avoid confusion and any
suggestion that we intended to incorporate into our practice under
paragraph 9(e) other areas of law that may require proof by ``clear and
convincing'' evidence. That said, it would be harmful to the effective
and efficient administration of our whistleblower program to broadly
waive non-compliance with the TCR-filing

requirement for non-meritorious claimants or claimants whose
entitlement to an award is not clearly established by the
administrative record, and we also believe that doing so would be
inconsistent with the congressional directive that individuals
``shall'' comply with the Commission's procedures for submitting
information.\262\ In adopting this provision for situations where the
record ``unambiguously'' demonstrates that an individual would
otherwise qualify for an award (and the record can ``readily'' be
developed to confirm this without a significant expenditure of staff
time and resources to do so), we intend the exception to be available
only where a clear case exists that the claimant otherwise merits an
award, and the claimant submitted his or her TCR and declaration as
required by Rule 21F-9(a) and 9(b) within 30 days of first learning
about those requirements.\263\ That said, the Commission continues to
retain its separate discretionary exemptive authorities under Rule 21F-
8(a) and Exchange Act Section 36(a) for circumstances that may warrant
exemptive relief.\264\
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    \262\ The standard being adopted is in some respects akin to the
plain-error standard of review under which some appellate courts
require that, if a litigant argues that an error occurred in the
trial court but the litigant failed to raise the issue with the
trial court in a timely manner, the error must be ``obvious'' and
``clear-cut'' for the appellate court to grant relief. See, e.g.,
United States v. Wahid, 614 F.3d 1009, 1015 (9th Cir. 2010). For a
claimant to qualify for discretionary relief under Rule 21F-9(e),
the claimant's status as a meritorious whistleblower must be clear-
cut, obvious, and readily ascertainable.
    \263\ The heightened confidentiality protections afforded by
Section 21F(h)(2) of the Exchange Act will not attach until an
individual has submitted a TCR in compliance with Rule 21F-9.
    \264\ The Commission's discretionary exemptive authorities will
continue to include circumstances where a whistleblower is
represented by counsel, but the facts and circumstances nevertheless
warrant relief from the requirements under Rule 21F-9(a) and (b).
And in pending cases, the staff will continue to assess the facts
and circumstances of each case to determine whether to recommend to
the Commission that application of the exemptive authority is
appropriate.
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    Finally, we have determined not to adopt the recommendation
discussed above from several commenters that the Commission afford an
unlimited opportunity for any individual that might otherwise qualify
as a meritorious whistleblower to comply with the procedural
requirements of Rule 21F-9(a) and (b). That standard would generate
additional inefficiencies in the program by requiring the Commission in
all cases to develop a comprehensive record detailing whether a
claimant was in fact meritorious before deciding whether the claimant
should be excused from the filing obligation. This would be
particularly burdensome because there may be no clear documentation as
to when and with whom on the staff a claimant spoke--or what was
conveyed--before filing a TCR and officially becoming a whistleblower
potentially eligible for an award. For this reason, we believe that it
is appropriate to limit the exception for untimely compliance with Rule
21F-9(a) and (b) to those claimants whom the Commission can readily
determine would otherwise clearly qualify as meritorious whistleblowers
without a significant expenditure of staff time and resources to do so.
In our view, this approach strikes an appropriate balance--ensuring
that individuals who would clearly obtain an award but for their
untimely compliance will in fact receive an award (provided they comply
with the 30-day period in paragraph (e)), while not imposing new and
undue burdens on the program to develop comprehensive records in cases
involving claimants who would not be clearly entitled to an award
(thereby preventing the diversion of staff time and resources from
cases involving meritorious whistleblowers who did in fact adhere to
the filing requirements of Rule 21F-9).

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

1. Proposed Rule
    As explained in the Proposing Release, the Commission proposed two
revisions to Exchange Act Rule 21F-12, which specifies the materials
that may form the basis of the Commission's award determination. First,
proposed Rule 21F-12(a)(3) would 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 to the Notice of Covered
Action, a request from the Office of the Whistleblower or the
Commission, or the Preliminary Determination.\265\ Materials submitted
after the respective deadlines for these submissions would not be
considered absent extraordinary circumstances excusing the delay.\266\
Second, proposed Rule 21F-12(a)(6) would clarify that it applies only
to materials submitted by third parties, not to materials submitted by
claimants themselves.
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    \265\ 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) and Rule 21F-11(a) & (b). Consistent with
Rule 21F-8(b), the Commission may specify a deadline when it
requests additional information from the whistleblower in support of
an award application. 17 CFR 240.21F-8(b). The time frame for
responding to the Preliminary Determination is expressly established
by Rule 21F-10(e) and Rule 21F-11(e). 17 CFR 240.21F-10(e), 21F-
11(e).
    \266\ 17 CFR 240.21F-8(a).
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2. Comments Received
    We received three comments supporting the proposed revisions to
Rule 21F-12 and none in opposition.\267\ One of these supporting
commenters also expressed concern, however, that the timeliness
requirement under proposed Rule 21F-12(a)(2) would prevent claimants
from alerting the Commission to developments arising after a deadline,
such as changes in the law, additional hardships suffered, and the
collection of additional funds on behalf of affected investors.\268\ To
accommodate this concern, this commenter suggested that Rule 21F-12 be
revised to allow the supplemental filing, after a deadline, of ``a
reasonably short presentation of (1) information requested by the
Commission, and/or (2) information that could not reasonably have been
known to the whistleblower at the WB-APP deadline.'' \269\
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    \267\ CCMC Letter; TAF Letter; Think Computer Letter.
    \268\ See TAF Letter.
    \269\ Id.
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3. Final Rule
    After considering the comments, we are adopting the revisions to
Rule 21F-12 as proposed. We have decided not to make further revision
to accommodate submissions concerning subsequent developments \270\
because our existing rules already meet that concern in two ways.
First, existing Rule 21F-8(b) already permits the Commission to request
additional information from a whistleblower in support of an award
application, regardless of whether the application deadline (or any
other relevant deadline) has already passed. Second, existing Rule 21F-
8(a) already permits the Commission, in its sole discretion, to waive a
deadline in the whistleblower rules based upon a showing of
extraordinary circumstances.\271\ Thus, the Commission already
possesses ample discretion to allow a post-deadline submission
concerning subsequent developments such as changes in the law precisely
because, by definition, that information was not available to the
claimant before the deadline.
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    \270\ Id.
    \271\ Id. 21F-8(a).

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

1. Proposed Rule
    As explained in the Proposing Release, the Commission proposed
revisions to Exchange Act Rule 21F-13 (which governs the administrative
record on appeal) to eliminate the designation of items for inclusion
in the record on appeal and instead to define the record on appeal in a
manner that conforms more closely to Rule 16 of the Federal Rules of
Appellate Procedure. Proposed Rule 21F-13(b) would exclude from the
record on appeal any pre-decisional or internal deliberative process
materials that are prepared exclusively to assist either the Commission
or the CRS, and also would exclude any materials that exclusively
concern any claimant other than the claimant who brought the appeal, in
matters where multiple claimants applied for an award under a single
Notice of Covered Action.
2. Comments Received
    We received two comments supporting the proposed revisions to Rule
21F-13 and none in opposition.\272\ One of these commenters also
suggested that internal deliberative process materials should be made
available so that whistleblowers can more easily identify errors in the
analysis of the CRS and the Commission.\273\
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    \272\ CCMC Letter; Think Computer Letter.
    \273\ Think Computer Letter. This commenter asserted, ``The
Commission has no stated basis for excluding these materials from
the record, and the justification of avoiding potential future
embarrassment is insufficient as a legal rationale.'' Id.
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3. Final Rule
    After considering the comments, we are adopting the revisions to
Rule 21F-13 as proposed. We have decided not to make internal
deliberative process materials available to whistleblowers as part of
the record on appeal. As noted when we adopted our whistleblower rules
in 2011, ``[t]hese materials are by their nature pre-decisional work
product that may often contain the staff's `frank discussion of legal
and policy making materials,' and the disclosure of these materials
would have a chilling effect on our decision-making process.'' \274\
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    \274\ Securities Whistleblower Incentives and Protections, 76 FR
34,347 (June 13, 2011) (quoting NLRB v. Sears, Roebuck & Co., 421
U.S. 132, 151 (1975)).
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N. Adoption of Exchange Act Rule 21F-18--Summary Disposition Process

1. Proposed Rule
    As explained in the Proposing Release, proposed Rule 21F-18 would
authorize the Office of the Whistleblower to follow a summary
disposition process for certain categories of denials of award
applications that are relatively straightforward, as a more streamlined
alternative to the existing processes specified in Rules 21F-10 and
21F-11. Thus, proposed Rule 21F-18 would apply to five categories of
denials: (1) Untimely award applications; (2) failure to submit a tip
in compliance with Rule 21F-9; (3) where the staff handling the covered
action or the underlying investigation (or examination) never received
or used the claimant's information and otherwise had no contact with
the claimant; (4) failure to comply with Rule 21F-8(b), which
encompasses Commission requests for supplemental information and for
signed confidentiality agreements; and (5) failure to specify the tip
on which the award claim is based. For these categories of denials, the
Office of the Whistleblower rather than the CRS would assume
responsibility for reviewing the record, issuing a Preliminary
Determination (here, a ``Preliminary Summary Disposition''),
considering any written response filed by the claimant, and issuing any
Proposed Final Determination (here, a ``Proposed Final Summary
Disposition''). Additionally, a claimant seeking to challenge a
Preliminary Summary Disposition would have 30 days rather than 60 days
in which to file a written response and would receive a staff
declaration containing the pertinent facts rather than the full
administrative record supporting the Preliminary Summary Disposition.
2. Comments Received
    Five commenters supported proposed Rule 21F-18,\275\ of which three
believed that the new summary disposition process would promote staff
efficiency in processing likely meritorious whistleblower award
claims.\276\ Eight commenters opposed the proposed rule,\277\ of which
six argued that the Commission should provide a quantitative analysis
of the anticipated effect of the proposal on the existing queue of
whistleblower award claims.\278\ Those who opposed the proposed rule
also contended that its effect on the existing queue of claims is
unclear because likely frivolous claims are already placed at the back
of the queue \279\ and that the proposal would not address the time
required to gather the information necessary to decide a claim.\280\
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    \275\ Anonymous-9 Letter; Anonymous-33 Letter; CCMC Letter; CWC
Letter; TAF Letter.
    \276\ CCMC Letter; CWC Letter; TAF Letter.
    \277\ Letters from Anonymous-26 (Sept. 15, 2018) (``Anonymous-26
Letter''); Anonymous-28 (Sept. 15, 2018) (``Anonymous-28 Letter'');
Anonymous-29 (Sept. 15, 2018) (``Anonymous-29 Letter''); Anonymous-
35 (``Anonymous-35 Letter'') (Sept. 14, 2018); Anonymous-65
(``Anonymous-65 Letter'') (Aug. 21, 2018); Anonymous-73
(``Anonymous-73 Letter'') (Aug. 17, 2018); Devorah Letter; Think
Computer Letter.
    \278\ Anonymous-26 Letter; Anonymous-28 Letter; Anonymous-29
Letter; Anonymous-35 Letter; Anonymous-65 Letter; Anonymous-73
Letter.
    \279\ Anonymous-35 Letter.
    \280\ Anonymous-73 Letter.
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    Two commenters addressed whether proposed Rule 21F-18 would afford
claimants due process.\281\ In this context, one commenter asserted
that the new rule would reduce ``potential whistleblowers' certainty
that their information would ever be taken seriously'' and suggested as
an alternative that the Office of the Whistleblower engage in ``more
transparent communication with whistleblowers (and other types of
stakeholders).'' \282\
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    \281\ Compare TAF Letter (stating that proposed Rule 21F-18
would ``ensure the provision of due process'' to claimants) with
Think Computer Letter (stating that proposed Rule 21F-18 is likely
to be challenged on due process grounds).
    \282\ See Think Computer Letter.
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    Two commenters expressed concern that 30 days would be too narrow a
window for claimants to prepare and file a written response to a
Preliminary Summary Disposition.\283\ One of these asserted that a 30-
day window would be too narrow absent a permanent tracking mechanism to
give claimants immediate notification of a Preliminary Summary
Disposition.\284\ The other suggested that claimants should be granted
an automatic 30-day extension (for 60 days total) upon written
request.\285\
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    \283\ See Anonymous-33 Letter; Devorah Letter.
    \284\ See Devorah Letter.
    \285\ See Anonymous-33 Letter.
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3. Final Rule
    After considering the comments, we are adopting Rule 21F-18 as
proposed.\286\ In our experience to date,

the five categories of relatively straightforward denials encompassed
by this rule have consumed a disproportionate share of staff time and
resources, with little or no corresponding benefit from utilizing the
more robust procedures under Rules 21F-10 and 21F-11. We anticipate
that the new summary disposition process will conserve time in
preparing the administrative record,\287\ since all pertinent facts
will be gathered in a single staff declaration at the Preliminary
Summary Disposition stage rather than in multiple declarations as has
been common in the past. We anticipate that the new process will permit
the more efficient disposition of all claims at all points in the
queue.\288\
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    \286\ The final rule text has been modified to conform to the