text of the discussion in the Proposing Release. The final rule text
also clarifies in section (a)(1)(2) that the summary disposition
process will apply to the denial of claims for failure to comply
with Rule 21F-9 only if the claimant is not eligible for a waiver
under either Rule 21F-9(e) or the Commission's other waiver
authorities because the Commission cannot readily develop an
administrative record that unambiguously demonstrates that the
claimant would otherwise qualify for an award. This language thus
ensures that the summary disposition process in Rule 21F-18 will be
applied in a manner consistent with the claimant's eligibility for a
waiver or lack thereof under either Rule 21F-9(e) or the
Commission's other waiver authorities.
    \287\ Cf. letter from Anonymous-73 (Aug. 17, 2018).
    \288\ Cf. letter from Anonymous-35 (Sept. 14, 2018).
---------------------------------------------------------------------------

    In our view, the summary disposition process under new Rule 21F-18
will afford claimants due process in the disposition of their claims.
Courts have emphasized that ``[i]n informal adjudications like these,
agencies must satisfy only minimal procedural requirements.'' \289\
Thus, the Due Process Clause \290\ imposes no blanket obligation to
allow the submission of rebuttal evidence by a claimant \291\ or to
disclose the agency's own evidence in order to facilitate such a
rebuttal.\292\ New Rule 21F-18 affords claimants appropriate procedural
protection; they have an opportunity to submit a rebuttal statement
after having received the Preliminary Summary Disposition and the
supporting staff declaration. Moreover, both the Preliminary Summary
Disposition and the Commission's final order will provide a brief
statement of the grounds for denial of the award application,\293\ and
a claimant may seek judicial review of the latter as specified in
Exchange Act Section 21F(f).\294\ Accordingly, the summary disposition
process will be fair and transparent, with an abbreviated record and a
streamlined process commensurate with the straightforward nature of the
issues relevant to these subsets of award claims.
---------------------------------------------------------------------------

    \289\ Sw. Airlines Co. v. Transp. Sec. Admin., 650 F.3d 752, 757
(D.C. Cir. 2011) (internal quotation marks and alterations omitted).
    \290\ U.S. Const. amend. V.
    \291\ See Butte Cty., Calif. v. Chaudhuri, 887 F.3d 501, 506
(D.C. Cir. 2018).
    \292\ See Sw. Airlines, 650 F.3d at 757.
    \293\ See Butte Cty., Calif. v. Hogen, 613 F.3d 190, 194 (D.C.
Cir. 2010).
    \294\ See 15 U.S.C. 78u-6(f).
---------------------------------------------------------------------------

    For similar reasons, we are adopting the 30-day window to respond
to a Preliminary Summary Disposition, as proposed.\295\ Courts have
sustained even shorter response periods in the absence of any blanket
obligation to accept rebuttal evidence,\296\ and we likewise find it
instructive that Congress established a 30-day window for claimants to
petition for judicial review of our final award determinations.\297\ We
also anticipate that the Office of the Whistleblower will continue its
current practice of providing claimants with prompt notice of such
preliminary decisions using the most efficient means of delivery in
light of the contact information provided by the claimant. Moreover,
any claimant who demonstrates that extraordinary circumstances will
prevent a timely written response may argue that the Commission should
exercise its discretion under Rule 21F-8(a) to extend this 30-day
deadline.
---------------------------------------------------------------------------

    \295\ Whistleblower Program Rules, 83 FR 34,726 (July 20, 2018)
(``Given the relatively straightforward nature of the matters that
would generally be eligible for summary disposition, this 30-day
window will afford any claimant a sufficient opportunity to provide
a meaningful reply'' to a Preliminary Summary Disposition.).
    \296\ See Butte Cty., 887 F.3d at 506 (sustaining 20-day
response period).
    \297\ 15 U.S.C. 78u-6(f).
---------------------------------------------------------------------------

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

    In the Proposing Release, the Commission proposed to make a
technical amendment to Rule 21F-4(c)(2) to correct an existing error in
the text of that rule. We did not receive any comments on this proposed
modification. Thus, for the reasons explained in the Proposing Release,
we are adopting the proposed technical amendment to this rule.

P. Interpretive Guidance Regarding the Meaning and Application of
``independent analysis''

1. Proposed Interpretive Guidance
    Section 21F of the Exchange Act limits whistleblower awards to
individuals who, among other requirements, submit ``original
information'' about possible securities violations. The statute defines
``original information'' as information that:

    (A) Is derived from the independent knowledge or analysis of a
whistleblower;
    (B) is not known to the Commission from any other source, unless
the whistleblower is the original source of the information; and
    (C) is not exclusively derived from an allegation made in a
judicial or administrative hearing, in a governmental report,
hearing, audit, or investigation, or from the news media, unless the
whistleblower is a source of the information.\298\
---------------------------------------------------------------------------

    \298\ 15 U.S.C. 78u-6(a)(3). Our rules add the requirement that
``original information'' must have been submitted for the first time
after the enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act. Rule 21F-4(b)(1)(iv).

    Further, before we can grant an award, we must determine that the
whistleblower's ``original information . . . led to the successful
enforcement'' of a Commission covered action or a related action.\299\
---------------------------------------------------------------------------

    \299\ 15 U.S.C. 78u-6(b)(1).
---------------------------------------------------------------------------

    In promulgating our whistleblower rules, we further defined the
terms ``independent knowledge'' and ``independent analysis,'' as used
in Section 21F(a)(3)(A) of the definition of ``original information'':

    (2) Independent knowledge means factual information in your
possession that is not derived from publicly available sources. You
may gain independent knowledge from your experiences,
communications, and observations in your business or social
interactions.
    (3) Independent analysis means your own analysis, whether done
alone or in combination with others. Analysis means your examination
and evaluation of information that may be publicly available, but
which reveals information that is not generally known or available
to the public.

    The Commission proposed interpretive guidance to address the
potential availability of a whistleblower award in cases where
information provided by a whistleblower is not based on the
whistleblower's ``independent knowledge'' but, instead, is premised on
information derived from the whistleblower's ``independent analysis''
of publicly available information. In formulating our views, we
considered Congress's and the Commission's determinations to
substantially restrict any role for publicly available information in
potential whistleblower awards. Further, with reference to the
requirement of Rule 21F-4(b)(3) that ``independent analysis'' must
``reveal[ ] information that is not generally known or available to the
public,'' we considered the framework that the D.C. Circuit and other
federal courts of appeal have developed for determining when fraudulent
transactions are deemed to have been publicly disclosed for purposes of
the so-called ``public disclosure bar'' under the False Claims
Act.\300\ Based on our review, we concluded:
---------------------------------------------------------------------------

    \300\ 31 U.S.C. 3730(e)(4)(A).

    In order to qualify as ``independent analysis,'' a
whistleblower's submission must

provide evaluation, assessment, or insight beyond what would be
reasonably apparent to the Commission from publicly available
information. In assessing whether this requirement is met, the
Commission would determine based on its own review of the relevant
facts during the award adjudication process whether the violations
---------------------------------------------------------------------------
could have been inferred from the facts available in public sources.

    In further clarifying our approach, we stated:

    A whistleblower's examination and evaluation of publicly
available information does not constitute ``analysis'' if the facts
disclosed in the public materials on which the whistleblower relies
and in other publicly available information are sufficient to raise
an inference of the possible violations alleged in the
whistleblower's tip. This is because, where the violations that the
whistleblower alleges can be inferred by the Commission from the
face of public materials, those violations are not ``reveal[ed]'' to
the Commission by the whistleblower's tip or any purported analysis
that the whistleblower has submitted. Rather, in order for a
whistleblower to be credited with providing ``independent
analysis,'' the whistleblower's examination and evaluation should
contribute ``significant independent information'' that ``bridges
the gap'' between the publicly available information and the
possible securities violations.

    We explained that ``significant independent information'' that
``bridges the gap'' in revealing violations may be found in the
application of technical expertise, and we gave as a specific example
of qualifying ``analysis'' the type of highly probative submissions to
the Commission made by Harry Markopolos in his efforts to expose the
Bernard Madoff fraud. However, we also stated that technical expertise
is not required. For example, non-experts may configure publicly
available information in a non-obvious way that reveals patterns
indicating possible violations that would not be otherwise inferable
from the public information or may engage in highly probative
calculations or some other meaningful exercise with the information
that may demonstrate the possibility of securities violations.
    However, we contrasted analysis of this type with cases where the
whistleblower directs the staff to publicly available information and
states that the information itself suggests a fraud or other
violations. The latter cases would not qualify as ``independent
analysis.'' We offered as examples tips where the whistleblower points
to common hallmarks of fraud on the face of the public materials (e.g.,
impossibly high, guaranteed investment returns or extravagant claims in
press releases) or to public discourse (e.g., discussions on a public
message board) in which investors or others are alleging a fraudulent
scheme. We also stated that the result would be the same whether the
individual relied on only one source (e.g., a single website) to
collect the publicly available information that demonstrates the
hallmarks of the fraud or the individual relied on a multitude of
different publicly available sources. We stated that, in each case, the
touchstone is whether the whistleblower's submission is revelatory in
utilizing publicly available information in a way that goes beyond the
information itself and affords the Commission with important insights
or information about possible violations.
    Finally, we explained that, even when this standard is met, a
whistleblower's independent analysis must still have ``led to'' a
successful covered enforcement action. This standard requires an
assessment of whether the whistleblower's analysis--as distinct from
the publicly available information on which the analysis was based--
either (1) was a principal motivating factor in the staff's decision to
open its investigation, or (2) made a substantial and important
contribution to the success of an existing investigation.\301\
---------------------------------------------------------------------------

    \301\ Although the interpretive guidance set forth in this
release is comprehensive and need not be read in conjunction with
the Proposing Release, we incorporate the Proposing Release herein
by reference to the extent that it reflects additional supporting
analysis and citations.
---------------------------------------------------------------------------

2. Comments Received
    We received 28 comments on our proposed interpretive guidance
regarding ``independent analysis.'' Twenty-four of these were critical
of the guidance.\302\ The predominant objection of these commenters was
that the proposed interpretive guidance would permit the Commission to
deny awards based on a ``retroactive'' or ``hindsight'' determination
of whether violations were ``reasonably apparent'' and ``could have''
been determined from information that was publicly available.\303\ Some
commenters expressed a further concern that this determination would be
made by an individual Enforcement staff member responsible for the
investigation, who might be predisposed to say that she could have
inferred the violation herself from the publicly available information
supplied by the whistleblower.\304\ A number of commenters pointed
critically to past violations such as the Bernard Madoff fraud that the
Commission failed to identify on its own.\305\ Those commenters urged
that an award should be available under the ``independent analysis''
prong of ``original information'' any time a member of the public
directs the staff to publicly available information of which the staff
was not aware and the staff acts upon the tip by pursuing an
investigation (and ultimately an enforcement action); an award should
be denied only if the staff, in fact, found the information and acted
on its own.\306\ One commenter argued that the whistleblower's
conclusion that violations exist should itself be viewed as non-public
information that the Commission did not previously possess.\307\
---------------------------------------------------------------------------

    \302\ See Think Computer Letter; letter from Anonymous-92 (July
18, 2018) (``Anonymous-92 Letter''); Kohn, Kohn & Colapinto July 24
Letter; letter from Anonymous-89 (July 25, 2018) (``Anonymous-89
Letter''); letters from Chris DiIorio dated July 2, 2018 and Aug. 2,
2018 (collectively ``DiIorio Letters''); letters from Dom Laviola
dated June 28, 2018 and Aug. 9, 2018 (collectively ``Laviola
Letters''); Anonymous-73 Letter; letter from Anonymous-72 (Aug. 17,
2018) (``Anonymous-72 Letter''); letter from Anonymous-71 (Aug. 20,
2018) (``Anonymous-71 Letter''); letter from Terry Smith (Aug. 22,
2018) (``Smith Letter''); Markopolos Letter; letter from National
Whistleblower Center (Sept. 17, 2018) (``NWC Sept. 17 Letter'');
Jansson letter; letter from Arthur ``Two Sheds'' Jackson (Sept. 17,
2018) (``Jackson Letter''); Cohen Milstein Letter; letter from Annie
Bell (Sept. 18, 2018) (``Bell Letter''); Better Markets Letter;
Anonymous-9 Letter; AFREF Letter; TAF Letter; letter from Anonymous-
121 (Oct. 17, 2018); (``Anonymous-121 Letter''); letter from
Anonymous-122 (Oct. 29, 2018) (``Anonymous-122 Letter''); letter
from Phillips & Cohen LLP (Oct. 25, 2019) (``Phillips & Cohen
Letter); letter from Anonymous-136 (Nov. 18, 2019) (``Anonymous-136
Letter'').
    \303\ See Think Computer Letter; Anonymous-89 Letter; DiIorio
Letters; Laviola Letters; Anonymous-73 Letter; Anonymous-71 Letter;
Smith Letter; Markopolos Letter; NWC Sept. 17 Letter; Jansson
Letter; Jackson Letter; Cohen Milstein Letter; Better Markets
Letter; Anonymous-9 Letter; AFREF Letter; TAF Letter; Anonymous-121
Letter.
    \304\ See TAF Letter; Phillips & Cohen Letter.
    \305\ See Think Computer Letter; Anonymous-89 Letter; Dilorio
Letters; Anonymous-73 Letter; Anonymous -71 Letter; NWC Sept. 17
Letter; Jackson Letter; Better Markets Letter.
    \306\ See Anonymous-92 Letter; Anonymous-73 Letter; Anonymous-71
Letter; Markopolos Letter; NWC Sept. 17 Letter; Better Markets
Letter; Anonymous-9 Letter; AFREF Letter; TAF Letter; Anonymous-121
Letter; Anonymous-122 Letter.
    \307\ See Cohen Milstein Letter.
---------------------------------------------------------------------------

    Commenters also urged that the proposed interpretation of
``independent analysis'' would discourage potential whistleblowers
because it would introduce ambiguity and uncertainty into the process
(e.g., as to the meaning of ``reasonably apparent''); \308\ that
whistleblowers should not be denied awards since they take significant
personal and professional risks in coming forward; \309\ and that the
proposed interpretive guidance runs counter to Congress's express
intent to make whistleblower awards available based on ``analysis'' of

publicly available information.\310\ Some commenters acknowledged that
merely pointing the Commission to a newspaper article or other publicly
available information should not qualify for an award; but, these and
other commenters emphasized the importance of contributions made by
financial services professionals, market analysts, and others who apply
specialized training or expertise to the review of publicly available
information, as well as the contributions of individuals who devote a
``substantial application of time and resources'' in ``exhaustive
research'' sifting through and assembling disparate pieces of public
information to identify possible violations.\311\ Two of these
commenters also pointed out that information may be technically
available to the public but obscure, costly, difficult to obtain, or
largely inaccessible to most people (e.g., documents produced in
response to a FOIA request).\312\
---------------------------------------------------------------------------

    \308\ See Think Computer Letter; Anonymous-73 Letter; Jansson
Letter; Better Markets Letter; Anonymous-9 Letter; AFREF Letter; TAF
Letter.
    \309\ See Laviola Letters; Anonymous-73 Letter; Better Markets
Letter; TAF Letter: Bell Letter.
    \310\ See Anonymous-92 Letter; Anonymous-73 Letter; Anonymous-71
Letter; NWC Sept. 17 Letter; Better Markets Letter; Laviola Letters.
    \311\ See Anonymous-92 Letters; Markopolos Letter; TAF Letter;
Cohen Milstein Letter; Anonymous-9 Letter; Phillips & Cohen Letter;
Anonymous-136 letter.
    \312\ See Markopolos Letter; Anonymous-9 Letter.
---------------------------------------------------------------------------

    Three commenters argued that False Claims Act precedent involving
the public disclosure bar should not be applied to interpreting the
Commission's rule on independent analysis.\313\ One of these commenters
argued that Commission actions differ from qui tam actions to the
extent that Commission actions involve entities for which there is a
large amount of publicly available information (e.g., periodic reports
or regulatory filings).\314\ Thus, this commenter argued, ``there will
almost always be publicly available information involved in
whistleblower submissions, leaving the quality of the whistleblower's
analysis as the key variable in most cases except the most brazen
frauds.'' \315\ Another commenter argued that Congress specifically
included the term ``analysis'' in Section 21F in recognition of the
fact that ``in the financial services industry . . . participants have
specialized knowledge and/or experience reviewing financial statements,
contracts, and filings and might be able to identify fraud . . . .''
\316\ According to this commenter, this fact distinguishes Section 21F
from the public disclosure bar because ``Congress specifically wanted
industry professionals to add their analysis with regards to the SEC
program to help root out fraud.'' A third commenter argued that the
False Claims Act expressly permits the government to allow relators to
pursue actions notwithstanding the public disclosure bar and also
permits courts to grant awards even where the action is based primarily
on public information.\317\ One commenter supported the proposed
interpretive guidance, including the approach of grounding the
``independent analysis'' framework in federal case law under the False
Claims Act.\318\ This commenter argued that the Commission's resources
should not be diverted from ``genuine enforcement cases,'' into
``separating wheat from chaff when bounty seekers submit information
that is already in the public record and contains no original
analysis.'' Another commenter echoed this sentiment, specifically
voicing concern that claims by company outsiders who appear to use
certain methods of analysis from publicly available information to
formulate claims of fraud ``distract[] SEC resources from investigating
whistleblower claims by individuals who have been or are subject to
retaliation and loss of employment from raising concerns of malfeasance
to their employer.'' \319\ This commenter, who identified herself as a
former company insider with ``inside knowledge of the Company,'' urged
that the award program should be focused on individuals who are at
personal risk of retaliation and who provide the Commission with
``specific facts, documents, and relevant analysis to support their
allegations.'' \320\
---------------------------------------------------------------------------

    \313\ See Think Computer Letter; Anonymous-92 Letter; Cohen
Milstein Letter.
    \314\ A qui tam action allows a private party to bring an action
on the government's behalf, and, if the government action is
successful, then the private party can share in the award.
    \315\ See Think Computer Letter (emphasis in original).
    \316\ See Anonymous-92 Letter.
    \317\ See Cohen Milstein Letter.
    \318\ See CCMC Letter. However, this commenter also argued that
the ``inference'' standard is too low and that ``the tip should
provide concrete, actionable information to the Commission.'' The
proposed guidance does not indicate, as the commenter may have
believed, that a tip would qualify for an award if the whistleblower
raised an inference of the violations, but rather that the
whistleblower would not merit an award if the facts in publicly
available information were sufficient to raise such an inference.
    \319\ See letter from Eileen Morrell (Aug. 29, 2019).
    \320\ Id. Two other commenters did not indicate disapproval of
the proposed guidance, but asked only that it not be applied to tips
that have been received before the effective date of the amended
rules. See letter from Anonymous-124 (Nov. 4, 2018); letter from
Taylor S. Amarel (Nov. 9, 2018) (``Amarel Letter''). These
commenters stated that they had previously submitted TCRs under the
existing rule, which, as noted, requires that ``analysis'' must
``reveal[ ] information that is not generally known or available to
the public,'' and further stated that ```bridging the gap' is
different than `not generally known.' '' The interpretive guidance
does not change any existing rules or the standards applied
thereunder, but merely clarifies the standards under the existing
rules that define and apply the term ``independent analysis.''
Further, as discussed below, the interpretation reflected in the
guidance is consistent with statutory requirements. For these
reasons, we believe that it is appropriate to apply the guidance to
previously submitted TCRs.
---------------------------------------------------------------------------

3. Final Interpretive Guidance
    After considering the comments, we have decided to adopt the
interpretive guidance as proposed with one additional interpretation.
Subject to Section 21F(a)(3)(C) of the Exchange Act,\321\ in the
exercise of our discretion the Commission may determine that a
whistleblower's examination and evaluation of publicly available
information reveals information that is ``not generally known or
available to the public''--and therefore is ``analysis'' within the
meaning of Rule 21F-4(b)(3)--where: (1) The whistleblower's conclusion
of possible securities violations derives from multiple sources,
including sources that, although publicly available, are not readily
identified and accessed by a member of the public without specialized
knowledge, unusual effort, or substantial cost; and (2) these sources
collectively raise a strong inference of a potential securities law
violation that is not reasonably inferable by the Commission from any
of the sources individually.
---------------------------------------------------------------------------

    \321\ Section 21F(a)(3)(C) requires that ``original information
not be exclusively derived from an allegation made in a judicial or
administrative hearing, in a governmental report, hearing, audit, or
investigation, or from the news media, unless the whistleblower is a
source of the information.'' 15 U.S.C. 78u-6(a)(3)(C).
---------------------------------------------------------------------------

    Our experience in administering the whistleblower program, and our
review of the comments submitted, confirm the existence of uncertainty
regarding the requirement of Rule 21F-4(b)(3) that independent analysis
must ``reveal[[hairsp]] information that is not generally known or
available to the public.'' By clarifying our application of the rule,
we expect to encourage more high-quality submissions that may result in
successful enforcement actions, promote transparency, reduce the volume
of non-meritorious claims, and increase the efficiency of the
whistleblower program. The interpretive guidance is not intended to
discourage tips from financial services professionals and others who
develop key insights and illuminate possible violations through the
application of expertise to the review and evaluation of publicly
available information. Moreover, as we explained, technical expertise
is not a requirement under the guidance. We expect to treat as
``independent analysis'' highly-probative submissions in which the
whistleblower's insights

and evaluation provide significant independent information that
``bridges the gap'' between the publicly available information itself
and the possibility of securities violations. The additional guidance
we are adopting adds further clarification by describing a specific
path available to experts and non-experts alike who devote substantial
time and effort and develop unique insights from bringing together
information from multiple specialized or difficult-to-obtain sources.
    Conversely, our experience has shown that some claimants seek
awards based on submissions that do little more than highlight
information that is reasonably evident from the public sources. We gave
as examples cases where the whistleblower points to common hallmarks of
fraud on the face of the public materials (e.g., impossibly high,
guaranteed investment returns or extravagant claims in press releases)
or to public discourse (e.g., discussions on a public message board) in
which investors or others are alleging a fraudulent scheme. Submissions
of this type do not constitute ``independent analysis.'' We emphasize,
however, that there is no bright-line test and whether any particular
submission contains sufficient independent insights to rise to the
level of analysis--and, hence, ``original information''--will depend on
all of the facts and circumstances of the case.
    In addition to promoting transparency and efficiency in the
operation of our whistleblower program, we continue to believe that
Congress did not intend that we should pay whistleblower awards merely
for alerting the Commission staff to publicly-available information.
The model for ``independent analysis'' that Congress had before it at
the time was the detailed and sophisticated work performed by Harry
Markopolos to expose the Madoff fraud, which consisted of more than
simply providing the Commission with already-public information.
    In conformance with this limitation, our interpretive guidance
adapts to the Section 21F context the framework that has found
widespread acceptance among federal courts of appeals for determining
when fraudulent transactions are deemed to already be publicly
disclosed under analogous provisions of the federal False Claims
Act.\322\ Although commenters criticized this approach as permitting
the Commission to make a ``retroactive'' determination of whether the
violations were ``reasonably apparent,'' we view the framework as an
important analytical tool to help inform our judgment on a dispositive
question under Section 21F: Whether a whistleblower's submission is
original, and not merely a recitation of publicly available
information. We observe further that, to the extent that our evaluation
under the guidance is backward-looking, it is reasonably based only on
information that was publicly available at the time of the
whistleblower's tip; it does not evaluate the whistleblower's
submission in light of any information that subsequently became public
or in light of the investigative record.\323\
---------------------------------------------------------------------------

    \322\ We are not persuaded by the view that we should not follow
False Claims Act precedent because of contextual differences between
the False Claims Act and Section 21F. First, the fact that a large
amount of publicly available information is filed with the
Commission does not suggest a reason for granting awards based
merely on publicly available information; as one commenter observed,
the key variable remains ``the quality of the whistleblower's
analysis'' of such information. See Think Computer Letter. Second,
nothing in the interpretive guidance is inconsistent with Congress's
expectation that the term ``analysis'' in Section 21F should support
awards when financial services professionals develop original
insights about possible violations through application of their
specialized knowledge or experience to the review of publicly
available information. Third, Section 21F does not have provisions
similar to those found in the False Claims Act that permit the
government to allow a relator to pursue an action notwithstanding
the public disclosure bar (31 U.S.C. 3730(e)(4)(A)) or that permit a
discretionary award of up to 10% when an action is based primarily
on certain publicly available information (31 U.S.C. 3730(d)(1)).
    \323\ Moreover, our rules already require that we make a range
of determinations about the nature, sources, and impact of the
information provided by a whistleblower before we can credit it as
``original information.'' For example, in assessing whether a
whistleblower possessed ``independent knowledge'' under Rule 21F-
4(b)(2), we must exclude information that is ``derived from publicly
available sources.'' Under Rule 21F-4(b)(4), we consider whether the
information was obtained by an excluded person or under excluded
circumstances, and, if so, whether an exception permitting use of
the information applies. Under Rule 21F-4(b)(6), we consider how the
information provided by a whistleblower related to other information
already in our possession at the time and whether the
whistleblower's submission ``materially add[ed]'' to our base of
knowledge about the matter. Viewed in the context of the many
individual determinations that we already must make in our
evaluation of whether a whistleblower provided ``original
information,'' it is reasonable that we should also consider whether
the whistleblower provided ``significant independent information''
that ``bridge[d] the gap'' between the publicly available
information and the possible securities violations.
---------------------------------------------------------------------------

    We are conscious of the concern expressed by some commenters that
individual Enforcement staff assigned to the investigation will be
responsible for determining whether the publicly available information
was sufficient to raise an inference of the violations. This is not the
case. In our award process, all determinations relevant to award
entitlement--including whether the claimant provided ``original
information''--are made in the first instance by the CRS, which
currently is comprised of the Director and Deputy Director of the
Enforcement Division and five other Enforcement senior officers.
Further, all preliminary award denials that are contested are
adjudicated by the Commission. As a result, the role of the individual
Enforcement staff member is merely to relay to the CRS the facts
relative to the investigation that are pertinent to the CRS's
deliberations. It is the job of the CRS (and ultimately the Commission)
to determine whether the claimant's submission constitutes
``independent analysis'' through the application of an objective,
rather than a subjective, standard of reasonableness to the record. The
interpretive guidance we are adopting provides a framework, consistent
with existing legal standards, for making this judgment.
    The commenters who urged that the test for ``independent analysis''
turn on whether the whistleblower provided information of which the
staff was not aware and that, in fact, caused the staff to take action
would read the ``analysis'' requirement out of the statute. Under the
second prong of ``original information'' (Section 21F(a)(3)(B)), we are
required to determine that information provided by a whistleblower was
``not known to the Commission from any other source''; and under
Section 21F(b)(1) we must determine that original information provided
by a whistleblower ``led to'' the successful enforcement of a
Commission covered action or a related action.\324\ We are obliged to
interpret ``analysis'' in the first prong of ``original information''
(Section 21F(a)(3)(A)) in a manner that gives independent meaning to
this term and is not redundant of the requirements that a
whistleblower's information be unknown to the Commission and lead to a
successful enforcement action.\325\
---------------------------------------------------------------------------

    \324\ 15 U.S.C. 78u-6(a)(3)(B), 78u-6(b)(1).
    \325\ See Moskal v. United States, 498 U.S. 103, 109 (1990)
(noting ``the established principle'' that ``every clause or word of
a statute'' should be ``give[n] effect, if possible''); Lowe v. SEC,
472 U.S. 181, 207 n.53 (1985) (similar).
---------------------------------------------------------------------------

    Put another way, in order to merit an award a whistleblower, among
other things, must provide information that is not known to the
Commission from any other source, that leads to successful enforcement,
and that also comprises ``independent analysis'' (or ``independent
knowledge''). Importantly, no commenters suggested any alternative
interpretations that would distinguish submissions that

provide ``analysis'' of publicly available information from those that
fail to do so.
    Our conclusion is buttressed by our reading of Section 21F(a)(6)
\326\ in conjunction with Section 21F(b)(1).\327\ Section 21F(a)(6)
defines a ``whistleblower,'' in relevant part, as an individual (or two
or more individuals acting jointly) who provide ``information''
relating to a violation of the securities laws to the Commission.
However, Section 21F(b)(1) authorizes us to pay awards only to
whistleblowers who provide ``original information'' to the Commission.
We read these provisions as reflecting Congress's understanding that
``information'' and ``original information'' are distinct concepts, and
that some number of individuals who are ``whistleblowers'' by virtue of
the ``information'' they provide to the Commission may not also qualify
as having provided ``original information.'' We cannot interpret
``independent analysis'' in a way that erases these distinctions and
provide awards for any ``information'' that results in a successful
enforcement action.
---------------------------------------------------------------------------

    \326\ 15 U.S.C. 78u-6(a)(6).
    \327\ 15 U.S.C. 78u-6(b)(1).
---------------------------------------------------------------------------

    Further, we observe that Section 21F(a)(3)(C) requires that
``original information'' not be ``exclusively derived . . . from the
news media.'' \328\ However, the ``news media'' is not limited to
conventional news sources. The Supreme Court has indicated that the
identical term in the False Claims Act's public disclosure bar has
``broad sweep,'' \329\ and lower courts interpreting that provision
have held that ``news media'' include publicly available websites that
promote a company's services and products.\330\ Thus, in many cases,
fulfilling our statutory duty not to grant awards for information that
is ``exclusively derived . . . from the news media'' will require that
we find in the whistleblower's purported ``analysis'' a degree of
substance that goes beyond the information available on the face of a
public website.\331\
---------------------------------------------------------------------------

    \328\ 15 U.S.C. 78u-6(a)(3)(C).
    \329\ Schindler Elevator Corp. v. United States ex rel. Kirk,
563 U.S. 401, 408 (2011).
    \330\ See United States ex rel. Osheroff v. Humana, Inc., 776
F.3d 805, 813 (11th Cir. 2015); United States ex rel. Cherwenka v.
Fastenal Co., 2018 U.S. Dist. LEXIS 75108, *20 (D. Minn. 2018);
United States ex rel. Green v. Service Contract Education and
Training Trust Fund, 843 F. Supp. 2d 20, 32-33 (D.D.C. 2012).
    \331\ See generally Schindler Elevator, 563 U.S. at 408 (``[T]o
determine the meaning of one word in the public disclosure bar, we
must consider the provision's `entire text,' read as an `integrated
whole.' '').
---------------------------------------------------------------------------

    Finally, in response to those commenters who expressed concern that
the proposed interpretive guidance would discourage individuals from
taking the significant personal and professional risks of becoming
whistleblowers, we note that our rules provide whistleblowers with the
ability to submit tips anonymously.\332\ Further, the interpretive
guidance as proposed, as well as the additional interpretation adopted
today, will enable such professionals to be treated as having provided
``original information'' in appropriate cases.
---------------------------------------------------------------------------

    \332\ See Rule 21F-9(c).
---------------------------------------------------------------------------

III. Effective Date and Applicability Dates

    The amended rules will become effective 30 days after publication
in the Federal Register. Although we proposed that the amended rules
would take effect 60 days after publication, we believe that it would
benefit the program to have the amended rules take effect sooner given
that these rules: (i) Largely codify existing agency interpretations
and practice; (ii) involve a necessary change to conform Exchange Act
Rule 21F-2 to a decision of the U.S. Supreme Court; and (iii) otherwise
are procedural in nature and intended to achieve efficiencies in the
Commission's processing of whistleblower award applications.
    The table below explains whether and how the amended rules will
apply:

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

------------------------------------------------------------------------
Rule 21F-2 addressing whether            The amendments to Rule 21F-2
 whistleblower status and certain         shall apply as follows: With
 threshold criteria related to award      respect to employment
 eligibility, heightened                  retaliation claims, the
 confidentiality from identity            amended rule applies only to
 disclosure, and employment anti-         employment-retaliation
 retaliation protection.                  violations occurring after the
                                          effective date of the rules;
                                          with respect to award
                                          eligibility and
                                          confidentiality protections,
                                          the amended rule applies only
                                          to information about a
                                          potential securities law
                                          violation that is submitted
                                          for the first time by an
                                          individual after the effective
                                          date of the rules.
Rule 21F-3(b)(1) and (b)(3) defining     The amendments to Rule 21F-3(b)
 ``related action''.                      shall apply only to covered-
                                          action and related-action
                                          award applications that are
                                          connected to a Notice of
                                          Covered Action (see Exchange
                                          Act Rule 21F-10(a)) posted on
                                          or after effective date of the
                                          rules.
                                         Note: Although this rule will
                                          not apply to pending award
                                          applications, the Commission
                                          may use its adjudicatory
                                          authority to apply the same
                                          principles to pending award
                                          applications.
Rule 21F-4(c)(2) technical amendment...  Rule 21F-4(c)(2) shall apply to
                                          all new whistleblower award
                                          applications filed after the
                                          effective date of the rules,
                                          as well as all whistleblower
                                          award applications that are
                                          pending and have not yet been
                                          the subject of a final order
                                          of the Commission by the
                                          effective date.
Rule 21F-4(d) defining ``action''......  Rule 21F-4(d) as amended shall
                                          apply to any DPA, NPA, or
                                          Commission settlement
                                          agreement that has a date of
                                          entry after July 21, 2010.
Rule 21F-4(e) defining ``monetary        Rule 21F-4(e) as amended shall
 sanctions''.                             be utilized by the Commission
                                          after the effective date of
                                          the final rules in determining
                                          whether an action qualifies as
                                          a ``covered action'' and in
                                          calculating any outstanding
                                          payments to be made to
                                          meritorious whistleblowers.
Rule 21F-6 concerning the Commission's   All aspects of this rule shall
 discretion to consider the dollar        apply to all award claims
 amount of monetary sanctions collected   still pending as of the
 when applying the award factors and      effective date of the rules.
 concerning award calculations for
 certain awards of $5 million or less.

Rule 21F-8(d) concerning flexibility     Rule 21F-8(d)(1) shall apply
 regarding the forms used in connection   only in connection with
 with the whistleblower program and       submissions of information
 related rule modifications.              that are made by an individual
                                          after the effective date of
                                          the proposed rules. Further,
                                          Rule 21F-8(d)(2) shall apply
                                          only to covered-action and
                                          related-action award
                                          applications that are
                                          connected to a Notice of
                                          Covered Action (see Exchange
                                          Act Rule 21F-10(a)) posted on
                                          or after the effective date of
                                          the rules.
Rule 21F-8(e) concerning false           Rule 21F-8(e) shall apply to
 statements or frivolous submissions,     all award claims still pending
 and revised Rule 21F-8(c).               as of the effective date of
                                          the rules, but as provided in
                                          Rule 21F-8(e)(4), claimants
                                          will be given notice and an
                                          opportunity to withdraw the
                                          relevant award application(s)
                                          submitted prior to the
                                          effective date. Further,
                                          revised Rule 21F-8(c)(7) shall
                                          apply to all award claims
                                          still pending as of the
                                          effective date of the rules.
Rule 21F-9 regarding Form TCR..........  Rule 21F-9 as amended shall
                                          apply only in connection with
                                          submissions of information
                                          that are made by an individual
                                          to qualify as a whistleblower
                                          after the effective date of
                                          the rules, except Rule 21F-
                                          9(e) shall apply to all award
                                          claims still pending as of the
                                          effective date of the rules.
Rule 21F-12 regarding materials that     Rule 21F-12 as amended shall
 may form the basis of the Commission's   apply only to covered-action
 award determination.                     and related-action award
                                          applications that are
                                          connected to a Notice of
                                          Covered Action (see Exchange
                                          Act Rule 21F-10(a)) posted on
                                          or after the effective date of
                                          the rules.
Rule 21F-13 regarding the                Rule 21F-13 as amended shall
 administrative record on appeal.         apply only to covered-action
                                          and related-action award
                                          applications that are
                                          connected to a Notice of
                                          Covered Action (see Exchange
                                          Act Rule 21F-10(a)) posted on
                                          or after the effective date of
                                          the rules.
Rule 21F-18 establishing a summary       Rule 21F-18 shall apply to any
 disposition process.                     whistleblower award
                                          application for which the
                                          Commission has not yet issued
                                          a Preliminary Determination as
                                          of the effective date of the
                                          rules, as well as to any
                                          future award applications that
                                          might be filed.
Interpretive guidance regarding the      As we noted in the Proposing
 meaning and application of the term      Release, although the
 ``independent analysis'' in Rule 21F-4.  Commission proposed the
                                          interpretive guidance for
                                          public comment, the Commission
                                          intends to rely on the
                                          principles articulated in the
                                          guidance for any whistleblower
                                          claims that are still pending
                                          at any stage because this
                                          guidance clarifies the
                                          existing rules that define and
                                          apply the term ``independent
                                          analysis.''
                                         Note: As discussed supra note
                                          320, the Commission received
                                          two comment letters concerning
                                          the application of the
                                          independent-analysis
                                          interpretive guidance to tips
                                          received before the effective
                                          date of the rules. For the
                                          reasons discussed in note 320,
                                          we have declined to follow
                                          that suggestion.
------------------------------------------------------------------------

IV. Other Matters

    If any of the provisions of these amendments, or the application of
these provisions to any person or circumstance, is held to be invalid,
such invalidity shall not affect other provisions or application of
such provisions to other persons or circumstances that can be given
effect without the invalid provision or application.
    Pursuant to the Congressional Review Act,\333\ the Office of
Information and Regulatory Affairs has designated these amendments as
not a ``major rule,'' as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    \333\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

A. Background

    Certain provisions of the whistleblower rule amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\334\ To qualify as a
whistleblower, individuals seeking to submit information of a possible
securities law violation to the Commission must do so by providing
information through the Commission's online portal or by submitting the
paper Form TCR. Individuals seeking an award must make their award
request using a paper Form WB-APP. The hours and costs associated with
preparing and submitting information through the online portal and
affected forms constitute reporting and cost burdens imposed by each
collection of information. An agency may not sponsor, conduct, or
require a response to an information collection unless a currently
valid Office of Management and Budget (``OMB'') control number is
displayed. The Commission submitted a proposed reorganization of the
affected collections of information to OMB for review in accordance
with the PRA.\335\ The titles for the affected collections of
information were: (1) ``Electronic Data Base Collection System--TCR''
(OMB Control No. 3235-0672); and (2) ``Form TCR'' and ``Form WB-APP''
(OMB Control No. 3235-0686).
---------------------------------------------------------------------------

    \334\ 44 U.S.C. 3501 et seq.
    \335\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

B. Estimated Costs and Burdens

    As described in more detail above, to provide the Commission with
the ability to make timely corresponding adjustments to the paper Form
TCR when it determines to modify the online portal, the Commission is
modifying Exchange Act Rule 21F-8 by adding a new section (d)(1) that
reads as follows: ``The Commission will periodically designate a Form
TCR (Tip, Complaint, or Referral) that individuals seeking be eligible
for an award through the process identified in Sec.  240.21F-9(a)(2)
shall use.'' In addition, to provide the Commission with greater
administrative flexibility to modify Form WB-APP, the Commission is
modifying Exchange Act Rule 21F-8 by adding a new section (d)(2) that
reads as follows: ``The Commission will also periodically designate a
Form WB-APP for use by individuals seeking to apply for an award under
either Sec.  240.21F-10 or Sec.  240.21F-11.''
    In connection with these amendments, the Commission proposed that
the OMB control numbers for the associated collections of information
be

reorganized, so that both the online portal and Form TCR would fall
under the same OMB control number (No. 3235-0672), and Form WB-APP
would have its own OMB control number (No. 3235-0686). The collections
of information would be re-titled, and the associated burden estimates
adjusted accordingly.
    In the Proposing Release, the Commission stated that it did not
anticipate that the amendments would increase the burden or cost to
individuals preparing and submitting the required information through
the online portal and affected forms. Although certain modifications
would be made to Form TCR so that the information elicited by the form
is consistent with the information collected through the online portal,
the Commission stated that these conforming modifications would not
increase appreciably the burden for individuals completing the form.
    The table below summarizes the burden and cost estimates associated
with the online portal and affected forms after the proposed
reorganization of the relevant control numbers:

               Table 1 of Section V.B.: Revised Burden Estimates Under the Proposed Reorganization
----------------------------------------------------------------------------------------------------------------
                                                                    OMB control
                              Title                                     No.        Burden hours        Costs
----------------------------------------------------------------------------------------------------------------
``Tips, Complaints and Referrals (TCR)''........................       3235-0672           9,050         $42,000
``Form WB-APP''.................................................       3235-0686             110           4,800
----------------------------------------------------------------------------------------------------------------

    The Commission did not receive any comments that directly addressed
its Paperwork Reduction Act analysis or the reorganized burden
estimates, and we do not believe any changes in the final rules will
affect these burden estimates.

C. Mandatory Collection of Information

    A whistleblower is required to complete either a hardcopy Form TCR
or submit his or her information electronically through the online
portal and to complete Form WB-APP to qualify for a whistleblower
award.

D. Confidentiality

    As explained above, the statute provides that the Commission must
maintain the confidentiality of the identity of each whistleblower,
subject to certain exceptions. Section 21F(h)(2) states that, except as
expressly provided:

    [T]he Commission and any officer or employee of the Commission
shall not disclose any information, including information provided
by a whistleblower to the Commission, which could reasonably be
expected to reveal the identity of a whistleblower, except in
accordance with the provisions of section 552a of title 5, United
States Code, unless and until required to be disclosed to a
defendant or respondent in connection with a public proceeding
instituted by the Commission [or certain specific entities listed in
paragraph (C) of Section 21F(h)(2)].

    Further, as discussed above, Rule 21F-2(c) requires that an
individual who is seeking this heightened confidentiality protection
must submit his or her information to the Commission using the online
portal or by completing a hardcopy Form TCR. If an individual fails to
do so, then under our amended rule he or she will be ineligible for the
heightened confidentiality protections.
    Section 21F(h)(2) also permits the Commission to share information
received from whistleblowers with certain domestic and foreign
regulatory and law enforcement agencies. However, the statute requires
the domestic entities to maintain such information as confidential, and
requires foreign entities to maintain such information in accordance
with such assurances of confidentiality as the Commission deems
appropriate.
    In addition, Section 21F(d)(2) provides that a whistleblower may
submit information to the Commission anonymously and still be eligible
for an award, so long as the whistleblower is represented by counsel.
However, the statute provides that a whistleblower must disclose his or
her identity prior to receiving payment of an award.

VI. Economic Analysis

    The Whistleblower Program helps the Commission better enforce the
federal securities laws. Unlike some of our rulemakings, we are not
addressing a market failure or market risk here. Rather, based on our
decade of experience administering the program, we have identified
aspects of the program that could be improved to enhance its
efficiency. Accordingly, the amendments to the whistleblower rules are
designed to be thoughtful improvements that should help enhance the
overall functioning of the program in ways that continue to encourage
individuals to come forward to report securities-law violations. The
specific changes we are adopting are designed to improve the efficiency
of claims processing and provide additional transparency that may
strengthen whistleblower incentives.\336\ By improving the
Whistleblower Program, these amendments should contribute to an
improvement in the Commission's law enforcement efforts.
---------------------------------------------------------------------------

    \336\ See section I.B.
---------------------------------------------------------------------------

    The Commission is sensitive to the economic consequences of its
rules, including the benefits, costs, and effects on efficiency,
competition, and capital formation. Section 23(a)(2) \337\ of the
Securities Exchange Act of 1934 requires the Commission, in
promulgating rules under the Exchange Act, to consider the impact that
any rule may have on competition and prohibits the Commission from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. Further, Section 3(f) of the Exchange Act \338\ requires the
Commission, when engaging in rulemaking where it is required to
consider or determine whether an action is necessary or appropriate in
the public interest, to consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.
---------------------------------------------------------------------------

    \337\ 15 U.S.C. 78w(a)(2).
    \338\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The economic analysis focuses on the amendments to Rule 21F-2, Rule
21F-3(b)(3), Rule 21F-4(d)(3), Rule 21F-6, Rule 21F-8(e), newly adopted
Exchange Act Rule 21F-18, and the adopted interpretive guidance
concerning the term ``independent analysis.'' As discussed above:
     The amendments to Rule 21F-2 are in response to the
Supreme Court's recent decision in Digital Realty Trust, Inc. v.
Somers; \339\
---------------------------------------------------------------------------

    \339\ 138 S. Ct. 767 (2018).
---------------------------------------------------------------------------

     Amended Rule 21F-3(b)(3) makes it clear that recovery from
the Commission is not possible where the Commission determines that a
separate whistleblower program more

appropriately applies to a non-Commission action;
     Amended Rule 21F-4(d)(3) would allow awards based on DPAs
or NPAs entered into by DOJ and settlement agreements entered into by
the Commission;
     Amended Rule 21F-6(c) provides additional clarity
regarding the potential award assessment;
     The newly added language to the opening paragraph of Rule
21F-6 clarifies the Commission's discretion to consider the dollar
amount of monetary sanctions collected when considering the existing
Award Factors and setting the Award Amount;
     Amended Rule 21F-8(e) would provide authority to bar
applicants from future award applications in certain limited
situations;
     New Rule 21F-18 would provide a streamlined award
consideration process for certain limited categories of non-meritorious
applications; and
     The adopted interpretive guidance would help clarify the
meaning of ``independent analysis'' as that term is defined in Exchange
Act Rule 21F-4 and utilized in the definition of ``original
information.''
    The other amendments adopted in this release are either procedural,
technical in nature, or codify existing practice, and therefore we do
not expect them to have significant benefits, costs, and economic
effects, or significantly impact efficiency, competition, and capital
formation.
    Many of the benefits and costs discussed below are difficult to
quantify. For example, although the analysis that follows details the
specific ways in which we expect the adopted rules to affect
whistleblower incentives, we lack the data necessary to estimate the
magnitudes of these effects separately or in the aggregate. Similarly,
we cannot precisely estimate the additional awards paid out of the IPF
due to the inclusion of DPAs and NPAs entered into by DOJ or settlement
agreements entered into by the Commission in the definition of an
``administrative action.'' \340\ Therefore, while we have attempted to
quantify economic effects where possible, much of the discussion of
economic effects is qualitative in nature.
---------------------------------------------------------------------------

    \340\ For an explanation of the IPF, see supra footnote 3.
---------------------------------------------------------------------------

A. Economic Baseline

    To examine the potential economic effects of the amendments, we
employ as a baseline the rules that the Commission adopted in May 2011
to implement the whistleblower program as currently administered, and
the Supreme Court's recent decision in Digital Realty Trust, Inc. v.
Somers. Further, we provide summary statistics that describe the
distribution of awards paid by the whistleblower program under the 2011
rules, and estimates of wages and salaries obtained from a number of
surveys.
1. Supreme Court Decision in Digital Realty Trust, Inc. v. Somers
    As described above, the Supreme Court held in Digital Realty Trust,
Inc. v. Somers \341\ that Section 21F(h)(1) of the Exchange Act
unambiguously requires that a person report a possible securities law
violation to the Commission in order to qualify for employment
retaliation protection.\342\
---------------------------------------------------------------------------

    \341\ 138 S. Ct. 767 (2018).
    \342\ Id. at 781-82.
---------------------------------------------------------------------------

2. Awards Issued by the SEC Whistleblower Program
    From August 2012 through July 2020, the Commission's whistleblower
program issued 81 whistleblower awards to 88 individuals (including, as
explained above, individuals who acted as joint whistleblowers).\343\
Table 1 of Section VI.A.3 reports the frequency distribution of these
awards by award size. Sixty (74%) of these awards were less than $5
million, of which 45 (56%) awards were less than $2 million. The dollar
amount of these 60 awards makes up 16 percent of the dollar amount of
all awards. Of the remaining 21 awards, 15 were at least $5 million but
less than $30 million and six exceeded $30 million. The dollar amount
of the 15 awards that were at least $5 million but less than $30
million makes up 39 percent of the dollar amount of all awards. The
dollar amount of the six awards that exceeded $30 million makes up 45
percent of the dollar amount of all awards. According to the Office of
the Whistleblower, of the 88 individuals who have received awards,
approximately 7 percent are high-ranking corporate executives at
companies of varying sizes and a majority of these executives received
awards that were under $5 million.
---------------------------------------------------------------------------

    \343\ These totals treat as single awards several cases where
whistleblowers' original information led to multiple covered actions
that were processed together in one award order recognizing the
total contributions of the whistleblower. Similarly, consistent with
the approach above governing cases where we grant an award for both
a Commission enforcement action and a related action by another
governmental entity based on the same information provided by the
whistleblower (see Rule 21F-3(b)), we consider covered-action awards
together with their corresponding related-action awards as single
whistleblower awards.

                    Table 1 of Section VI.A.3: Frequency Distribution of Whistleblower Awards
  [We use awards issued to whistleblowers by the SEC Whistleblower Program from August 2012 through July 2020.
 ``Number'' is the number of awards that fall within an award size category. ``Percent'' is the number of awards
 in an award size category as a fraction of the total number of awards. ``Percent of Total Dollars Awarded'' is
           the dollars awarded in an award size category as a fraction of the total dollars awarded.]
----------------------------------------------------------------------------------------------------------------
                                                                                Percent of
                       Award size category                            Number          Percent      total dollars
                                                                                awarded
----------------------------------------------------------------------------------------------------------------
Less than $2 million............................................              45              56               6
At least $2 million but less than $5 million....................              15              19              10
At least $5 million but less than $10 million...................               6               7               8
At least $10 million but less than $15 million..................               2               2               5
At least $15 million but less than $20 million..................               4               5              13
At least $20 million but less than $30 million..................               3               4              13
At least $30 million............................................               6               7              45
                                                                 -----------------------------------------------
    Total.......................................................              81             100             100
----------------------------------------------------------------------------------------------------------------

    In addition to summarizing the distribution of awards to
whistleblowers, we also summarize the distribution of awards by
enforcement action. For each enforcement action, we identify all
whistleblowers who receive an award for that enforcement action and sum
their awards to arrive at the aggregate award for that enforcement
action. Table 2 of Section VI.A.3 indicates that between August 2012
and July 2020, there were 74 enforcement actions for which the
Commission issued whistleblower awards.\344\ Fifty-six enforcement
actions had awards of less than $5 million, of which 43 awards were
less than $2 million. The dollar amount of awards associated with these
56 actions makes up 15 percent of the dollar amount of all awards. Of
the remaining 18 actions, 13 had aggregate awards of at least $5
million but less than $30 million and only five had an aggregate award
that exceeded $30 million. The dollar amount of awards associated with
the 13 actions makes up 34 percent of the dollar amount of all awards.
The dollar amount of the awards associated with the five largest
actions makes up 51 percent of the dollar amount of all awards.
---------------------------------------------------------------------------

    \344\ As noted, we aggregate related actions with their
corresponding Commission actions for purposes of this analysis.

                Table 2 of Section VI.A.3: Frequency Distribution of Awards by Enforcement Action
[We use awards issued to whistleblowers by the SEC Whistleblower Program from August 2012 through July 2020. For
  each enforcement action, we identify all whistleblowers who received an award for that enforcement action and
   sum their awards to arrive at the aggregate award for that enforcement action. ``Number'' is the number of
  aggregate awards that fall within an award size category. ``Percent'' is the number of aggregate awards in an
  award size category as a fraction of the total number of awards. ``Percent of Total Dollars Awarded'' is the
             dollars awarded in an award size category as a fraction of the total dollars awarded.]
----------------------------------------------------------------------------------------------------------------
                                                                                Percent of
                       Award size category                            Number         Percent *     total dollars
                                                                                awarded
----------------------------------------------------------------------------------------------------------------
Less than $2 million............................................              43              58               6
At least $2 million but less than $5 million....................              13              18               9
At least $5 million but less than $10 million...................               5               7               6
At least $10 million but less than $15 million..................               2               3               5
At least $15 million but less than $20 million..................               3               4              10
At least $20 million but less than $30 million..................               3               4              13
At least $30 million............................................               5               7              51
                                                                 -----------------------------------------------
    Total.......................................................              74             100             100
----------------------------------------------------------------------------------------------------------------
* Figures do not sum to 100% due to rounding.

3. Estimates of Current Annual Wages
    Prospective whistleblowers' annual wages are potentially relevant
to various aspects of the adopted rules. In particular, summary
statistics of annual wages could inform an assessment of the potential
impact of Rule 21F-6(c) on whistleblowing incentives. Table 3 of
Section VI.A.3 presents, by industry, the pre-tax annual wages per
employee (``average wages'') estimated by the Bureau of Labor
Statistics for 2018.\345\ Average wages vary from a low of $24,087 in
the leisure and hospitality industry to a high of $113,781 in the
information industry.
---------------------------------------------------------------------------

    \345\ Wage data used for calculating the annual wages per
employee are derived from the quarterly tax reports submitted to
state government workforce agencies by employers, subject to state
unemployment insurance laws, and from Federal agencies subject to
the Unemployment Compensation for Federal Employees program. Further
information is available at https://www.bls.gov/cew/cewbultncur.htm#Tables.
---------------------------------------------------------------------------

    These averages do not reflect the substantial degree of within-
industry wage variation. For example, more senior employees involved in
financial activities likely earn higher wages than their more junior
counterparts; likewise, staff who supply significant expertise may earn
more than those who do not. A 2017 report documenting survey responses
from 377 financial professionals included average base salaries for
senior-level financial executives between $133,859 and $342,154,
depending on title and whether companies are public or private.\346\
---------------------------------------------------------------------------

    \346\ See ``Financial Executive Compensation Report 2017,''
Grant Thornton LLP and Financial Executives Foundation, Inc., 2017
(available at https://www.grantthornton.com/~/media/content-page-
files/tax/pdfs/FEI-financial-exec-comp-survey-2017/FEI-survey-
results-2017.ashx).

  Table 3 of Section VI.A.3: 2018 Average Annual Wages per Employee by
                                Industry
 [This table presents the pre-tax annual wages per employee at privately
owned establishments aggregated by industry as reported by the Bureau of
                           Labor Statistics.]
------------------------------------------------------------------------
                                                           Annual wages
                        Industry                           per employee
                                                                ($)
------------------------------------------------------------------------
Natural resources and mining............................          59,628
Construction............................................          62,727
Manufacturing...........................................          68,525
Trade, transportation, and utilities....................          47,607
Information.............................................         113,781
Financial activities....................................          95,561
Professional and business services......................          75,169
Education and health services...........................          50,444
Leisure and hospitality.................................          24,087

Other services..........................................          38,464
Unclassified............................................          57,227
------------------------------------------------------------------------

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

    In this section, we discuss the potential benefits, costs, and
economic effects of the adopted rules. We also respond to comments that
relate to the benefits, costs, and economic effects of these rules.
1. Amendments to Rule 21F-2
    Most of the amendments to Rule 21F-2 are either in response to the
Supreme Court's decision in Digital Realty Trust, Inc. v. Somers \347\
or conform the rule substantively with current practice. Two
amendments, however, do represent changes relative to the economic
baseline, and their potential benefits, costs, and economic effects are
discussed here. Final Rule 21F-2(a)(1) extends employment retaliation
protection only to an individual who provides the Commission with
information ``in writing.'' Final Rule 21F-2(d)(1)(iii), among other
things, limits employment retaliation protection to lawful acts that
``relate to the subject matter'' of the person's submission to the
Commission under final Rule 21F-2(a).
---------------------------------------------------------------------------

    \347\ 138 S. Ct. 767 (2018).
---------------------------------------------------------------------------

a. Final Rule 21F-2(a)(1)
    Final Rule 21F-2(a)(1) could potentially impose a burden on those
individuals who want to report potential violations to the Commission
and wish to qualify as a ``whistleblower'' solely for employment
retaliation protection. Such individuals might decide not to report to
the Commission if the reporting burden is perceived to outweigh the
benefits associated with retaliation protection. Our experience to date
with individuals who have sought to qualify for a whistleblower award
suggests that requiring that information be provided in writing
presents, at most, a minimal burden to individuals who want to report
violations to the Commission while facilitating the staff's use of the
information. To the extent that this experience is informative about
the reporting burden for individuals who will seek employment
retaliation protection, such a burden would also be, at most,
minimal.\348\ Accordingly, the final rule would likely not have an
adverse impact on the whistleblowing incentives of those individuals
who wish to qualify as a ``whistleblower'' solely for employment
retaliation protection.
---------------------------------------------------------------------------

    \348\ See also Section II.G.3.
---------------------------------------------------------------------------

    We considered two alternatives to the approach we are adopting in
Rule 21F-2(a): (1) Requiring information to be provided to the
Commission consistent with Rule 21F-9(a)--that is, either through the
online portal at http://www.sec.gov or by mailing or faxing a Form TCR
to the Office of the Whistleblower; \349\ and (2) permitting additional
manners of reporting for anti-retaliation purposes (such as placing a
telephone call or making an oral report more generally).\350\
---------------------------------------------------------------------------

    \349\ A commenter also suggested this alternative. See CCMC
Letter.
    \350\ See letters from TAF and NELA.
---------------------------------------------------------------------------

    We declined to adopt the first alternative because it would, in our
view, unnecessarily limit the means of reporting to the Commission by
individuals who are merely seeking employment retaliation protection.
Limiting whistleblower status to those individuals who follow the first
alternative could unnecessarily exclude individuals from the benefits
of Section 21F(h)(2)'s employment retaliation protections without
providing any accompanying benefit to the Commission, whistleblowers,
or the public generally. Further, requiring that individuals report
information simply ``in writing'' allows individuals to choose the
least burdensome manner to report violations to the Commission,
potentially lowering costs including, for example, time spent providing
the information.
    A second alternative to the final rule would have permitted
reporting violations other than ``in writing'' that would, nonetheless,
preserve a whistleblower's retaliation protection. While the Digital
Realty decision requires a report as a prerequisite for retaliation
protection, it is the final rule that requires the report to the
Commission to be ``in writing.'' Some commenters supported the ``in
writing'' requirement because it provided clarity and certainty as to
when the whistleblower provided information and what information was
provided,\351\ while other commenters opposed the ``in writing''
requirement, noting that reporting can take many other forms and the
purpose of the retaliation protection statute is to encourage
reporting, whether in writing or not.\352\ One commenter noted that
reporting not made in writing (e.g., oral disclosure) could readily be
put into writing at the time of disclosure or any time after
disclosure.\353\ However, such an approach could raise a number of
concerns. There may be a loss of information or the introduction of
ambiguity if the whistleblower fails to provide a sufficiently detailed
and clear oral disclosure, especially if the whistleblower fears
retaliation or is otherwise distracted. Second, there is likely to be a
delay between receiving an oral disclosure and memorializing it. Third,
to address the two foregoing concerns, repeated contacts with the
whistleblower may be necessary, which could further delay getting the
whistleblower's information to the appropriate staff. While the
drafting of a written report takes time, a written report likely would
mitigate the aforementioned concerns related to oral disclosure.
Finally, a commenter noted that an urgent need to make an oral report,
particularly if the whistleblower feared retaliation and was therefore
unwilling to make a written report, could leave a whistleblower who
provides valuable information to the Commission without retaliation
protection.\354\ However, the act of providing a written report ensures
that a whistleblower has the option to anonymously and confidentially
report a violation and, more to the point, that the whistleblower will
be provided with

retaliation protection. We decline to adopt the second alternative due
to the concerns discussed above and to avoid potential costs that could
arise if the Commission became involved in disputes in private anti-
retaliation lawsuits over what information was provided to whom on what
dates. Requiring that any reporting be done in writing obviates these
concerns and potential costs.
---------------------------------------------------------------------------

    \351\ See letters from CPMC and CWC.
    \352\ See Kohn, Kohn & Colapinto (May 6 Letter); NELA Letter;
TAF Letter.
    \353\ See NELA Letter.
    \354\ See TAF Letter.
---------------------------------------------------------------------------

b. Rule 21F-2(d)(1)(iii)
    Rule 21F-2(d)(1)(iii) helps avoid the result that an individual
who, having qualified as a whistleblower under the Commission's rules
could, as a result, receive subsequent employment retaliation
protection for making a required disclosure within the meaning of
clause (iii) of Section 21F(h)(1)(A) that does not relate to the
subject matter of the report the whistleblower made to the Commission.
For individuals who want to make non-Commission reports about potential
violations to their employers and desire employment retaliation
protection for such lawful acts, the final rule could increase the
incentives of these individuals to also report directly to the
Commission. While final Rule 21F-2(a)'s ``in writing'' requirement
could potentially impose a burden on these individuals, for the reasons
discussed in the analysis of final Rule 21F-2(a)(1), supra, we believe
that such a reporting burden would, at most, be minimal and would
likely not limit the reporting incentives afforded by final Rule 21F-
2(d)(1)(iii).
    As discussed above, although some commenters expressed reservations
about the uncertainty this provision might generate for
whistleblowers,\355\ 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. To the extent that the Commission's application is
flexible, this provision should not discourage potential whistleblowers
due to uncertainty about what conduct is protected.
---------------------------------------------------------------------------

    \355\ See NELA Letter.
---------------------------------------------------------------------------

2. Rule 21F-3(b)(3) \356\
---------------------------------------------------------------------------

    \356\ This rule was proposed as new paragraph (4) to Exchange
Act Rule 21F-3(b). See 83 FR at 34738.
---------------------------------------------------------------------------

    As adopted, Rule 21F-3(b)(3) makes clear that a law-enforcement
action will not qualify as a related action if the Commission
determines that there is a separate whistleblower award program that
more appropriately applies to the enforcement action. Further, Rule
21F-3(b)(3) makes clear that the Commission will not make an award to
the whistleblower for a potential related action if the whistleblower
has already been granted an award by the governmental entity
responsible for administering another whistleblower award program.
Further, under final Rule 21F-3(b)(3), if the whistleblower was denied
an award by another award program, the whistleblower would not be
permitted to readjudicate any issues before the Commission that the
governmental entity responsible for administering the other
whistleblower award program resolved as part of the award denial.
    The final rule clarifies that a whistleblower may not adjudicate
his or her contributions in separate forums and potentially obtain two
separate awards based on the same whistleblower report. While the rules
that were adopted in May 2011 precluded this result when an action is
applicable to both the Commission's whistleblower program and the
CFTC's whistleblower program,\357\ those rules do not expressly
preclude this result when the non-SEC whistleblower program is
administered by a governmental entity other than the CFTC. Thus, the
Commission is amending its rules to reflect its current practice, thus
clarifying that its position with respect to the CFTC applies to all
other governmental entities,\358\ because we believe clarity in this
area will improve decision making by whistleblowers and their counsel.
---------------------------------------------------------------------------

    \357\ See Rule 21F-3(b)(3).
    \358\ In addition to the CFTC, there are various Federal and
state whistleblower programs that are currently administered by
other agencies or governmental entities, including a program
administered by the IRS, whistleblower award programs related to the
False Claims Act and the Financial Institution Reform, Recovery, and
Enforcement Act (FIRREA), and state whistleblower award programs
established in Utah and Indiana. See also Proposing Release 83 FR at
34735.
---------------------------------------------------------------------------

    The final rule would likely not have an adverse impact on the
incentives of individuals who may report violations that result in
enforcement actions potentially implicating both the Commission's
whistleblower program and the whistleblower program of another
governmental entity. Such an individual likely has the ability to
determine (e.g., using web searches, advice from legal counsel),
whether her report could potentially be eligible for an award under the
whistleblower program of another governmental entity if presented to
that governmental entity, whether or not her report is ultimately
eligible for an award under the Commission's whistleblower program. The
existence of an alternative whistleblower program potentially improves
the individual's overall likelihood of receiving an award from
reporting a violation and would likely not adversely impact the
individual's reporting incentives. In addition, potential
whistleblowers with legal counsel likely would have taken into account
the Commission's current practice, which the final rule codifies. As
discussed in Section II(C) of the proposing release,\359\ to date, the
Commission has never paid an award on a matter where a second
whistleblower program also applied to the same matter, nor has the
Commission ever indicated that it would do so. As such, the final rule
is unlikely to present a potential whistleblower with a disincentive to
report a possible securities law violation.
---------------------------------------------------------------------------

    \359\ See 83 FR at 34709-34711.
---------------------------------------------------------------------------

    One commenter was concerned that the proposed rule could
disincentivize whistleblowing if the more applicable program has an
award cap that is lower than the whistleblower's desired compensation
(e.g., FIRREA's $1.6 million limit).\360\ In response to this concern,
we note that whistleblowing is an individual decision that is generally
guided by a complex mix of pecuniary elements and non-pecuniary
elements.\361\ While it is possible that a more applicable award
program with a lower award cap could, under the final rule, reduce a
whistleblower's monetary incentives to report potential violations to
the Commission, we believe that this possibility is so remote relative
to other factors that it is unlikely to serve as a meaningful
disincentive for a potential whistleblower. For example, when
considering whether to report a potential violation to the Commission,
that potential whistleblower still stands to receive an award from us
for any Commission covered action; if a covered action does not occur,
any ancillary action may produce an award for that whistleblower under
the more applicable program. Even if the more applicable program has an
award cap, individuals may still decide to report potential violations
if they are sufficiently motivated by non-pecuniary elements, or the
award amount available under the other program, or both. Because the
amendment codifies current practice, we believe the final rule would
likely not have an adverse impact on reporting incentives.
---------------------------------------------------------------------------

    \360\ See Cornell Law Clinic Letter.
    \361\ See Securities Whistleblower Incentives and Protections
Adopting Release, 76 FR at 34355, note 433.
---------------------------------------------------------------------------

3. Rule 21F-4(d)(3)
    Rule 21F-4(d)(3) provides that, for purposes of making a
whistleblower

award, an NPA or DPA entered into by DOJ in a criminal case, or a
settlement agreement entered into by the Commission outside of the
context of a judicial or administrative proceeding to address
violations of the securities laws, will be deemed to be an
``administrative action'' and any money required to be paid thereunder
will be deemed a ``monetary sanction.'' \362\ The rule will likely
result in more awards because awards would be paid for DPAs and NPAs
entered into by DOJ as well as settlement agreements entered into by
the Commission in addition to judicial or administrative proceedings
covered by the existing rules. The rule should enhance the incentives
for whistleblowers to come forward in a timely manner to the extent
that it signals to prospective whistleblowers that a wider array of
enforcement resolutions may result in awards.
---------------------------------------------------------------------------

    \362\ See Section II.A.3 regarding the clarifications related to
the requirement that agreements be ``similar'' in order to qualify
as ``administrative actions'' imposing ``monetary sanctions.''
---------------------------------------------------------------------------

4. Rule 21F-6(c)
    Rule 21F-6(c) provides a specific presumption that, subject to
Commission discretion and certain other conditions, where the statutory
maximum award of 30 percent of the monetary sanctions collected would
total $5 million or less for all actions involving the whistleblower's
same original information, the Award Amount presumptively will be set
at the statutory maximum amount. However, this presumption would not
apply under certain circumstances. For example, the Commission will not
presume the award to be the statutory maximum amount if any of the
negative Award Factors that are identified in Exchange Act Rule 21F-
6(b) are found to be present with respect to the whistleblower's award
claim or if the award claim triggers Exchange Act Rule 21F-16
(concerning awards to whistleblowers who engage in culpable conduct).
In the case of multiple whistleblowers, the award could be set at the
statutory maximum, but the allocation of the award could be altered if
any of the negative Award Factors applied to one or more whistleblower.
Additionally, where, under Rule 21F-6(a), the assistance provided by
the whistleblower is limited, the Commission may exercise its
discretion to set the Award Amount lower than the statutory maximum.
    The final rule could enhance the incentives of potential
whistleblowers who anticipate receiving awards below $5 million and do
not expect to be subject to any of the above conditions that would
preclude an application of the presumption. The prospect of a larger
award could further incentivize these potential whistleblowers to
report violations in a timely manner to the Commission, including
before any of the negative Award Factors are present. Further, we
anticipate that the final rule will increase incentives to report
wrongdoing more broadly. At the time of deciding whether to submit a
tip, it would be very unlikely that a whistleblower could estimate
accurately the amount that might be awarded. The final rule gives
whistleblowers some assurance that if monetary sanctions were to be
insufficient to support an award of over $5 million, then the award-
setting process will, in the vast majority of cases, start from the
presumption of the maximum statutory award of 30% of monetary
sanctions.
    From a cost perspective, the final rule could potentially result in
larger awards being paid because an award that would yield a potential
payout below $5 million may be increased. As indicated in Table 1 of
Section VI.A.3, as of July 31, 2020, the Commission has granted 60
whistleblower awards (i.e., 74 percent of awards and 16 percent of
total dollars awarded) that were below $5 million. To the extent that
the distribution of past awards provides a reasonable estimate of the
distribution of likely future awards to whistleblowers, the majority of
future awards are likely to be subject to the final rule.
    An alternative that we considered was using the $2 million
threshold described in the proposal. In particular, the proposed rule
would have increased incentives for potential whistleblowers who
expected awards of less than $2 million, but with a potential increase
to a maximum of $2 million. Like the final rule, the proposed rule
would have included the limitations mentioned above to specify which
whistleblowers could be considered for the presumption. The alternative
would have provided increased incentives relative to current practice.
Similarly, relative to current practice, the final rule's presumptive
increase of small awards that are $5 million or less provides greater
incentives and clarity regarding the application of increased awards
for whistleblowers whose awards otherwise might have been smaller (and
could have engendered concern in potential whistleblowers that they
would have been smaller).
    Compared to the proposed rule, the final rule likely would result
in increases to the amount of the award for more whistleblowers, as
suggested by the number of awards that fell between $2 million and $5
million, as shown in Table 1 of Section VI.A.3.
5. Proposed Rule 21F-6(d) and Amendments to Rule 21F-6
a. Consideration of Rule
    The amendments to Rule 21F-6 that we are adopting today clarify
that the Commission has the authority to consider the dollar amount
when applying the award criteria. Because these amendments only clarify
the Commission's existing authority, we do not believe they will have
significant benefits, costs, and economic effects, or will
significantly impact efficiency, competition, and capital formation.
    As noted above, we are not adopting Proposed Rule 21F-6(d). As
such, awards exceeding $30 million will not be subject to a specific
mechanism for review. This alternative, as described in the proposal,
would have provided a specific mechanism to guide the Commission's
existing discretion to determine awards, specifically in the context of
large awards. This mechanism would have provided a rubric within which
the Commission could determine whether an award exceeded an amount
necessary to sufficiently incentivize whistleblowers, which is a goal
of the whistleblower award program.
    In the Proposing Release, we stated our belief that Proposed Rule
21F-6(d) could reduce the likelihood of awards that are excessive in
light of the whistleblower program's goals and the interests of
investors and the public, and thus could foster more efficient use of
the IPF.\363\ In light of some commenters' perception that any
downward-departure mechanism for exceedingly large potential awards
would serve to hold awards at the 10 percent statutory minimum, the
Commission at this time has determined not to adopt this alternative,
thereby avoiding any detrimental chilling effect on potential
whistleblowers coming forward as a result of misperceiving the purpose
and function of the proposed provision.
---------------------------------------------------------------------------

    \363\ Whistleblower Program Rules, 83 FR 34,739 (July 20, 2018).
---------------------------------------------------------------------------

6. Rule 21F-8(e)
    As discussed above,\364\ we are adopting Rule 21F-8(e)
substantially as proposed. The final rule could increase the speed and
efficiency of the award determination process.\365\ By

permanently barring applicants that make three or more frivolous award
applications the final rule could help free up staff resources that
could then be devoted to processing potentially meritorious award
applications and other work related to the whistleblower program.\366\
Based on the Commission's historical experience, the Commission
believes the rule would have a meaningful impact in terms of freeing up
staff resources. Likewise, to the extent that potentially being barred
from awards discourages submitting frivolous applications, the rule may
also create a deterrent effect that further limits the number of
frivolous award applications that staff have to address. To the extent
that the final rule fosters faster award determination and payment and
to the extent that this motivates whistleblowing, individuals are more
likely to come forward and report potential violations as a result of
the final rule.
---------------------------------------------------------------------------

    \364\ See Section II.I.
    \365\ We acknowledge that this potential benefit rests, in large
part, on the premise that the applicants currently submitting
multiple frivolous applications are unlikely to change their
behavior.
    \366\ Other work includes, for example, serving as subject
matter experts to investigative staff regarding whistleblower issues
in investigations, intake of hard copy tips, posting of Notices of
Covered Actions, and manning the whistleblower hotline. To help
promote the SEC's whistleblower program and establish a line of
communication with the public, the Office of the Whistleblower
operates a hotline where whistleblowers, their attorneys, or other
members of the public with questions about the program may call to
speak to the Office of the Whistleblower's staff. During Fiscal Year
2019, the Office of the Whistleblower returned over 2,600 calls from
members of the public. Since May 2011 when the hotline was
established, the Office of the Whistleblower has returned nearly
24,000 calls from the public. See SEC Whistleblower Program 2019
Annual Report to Congress (Nov. 15, 2019) (available at https://www.sec.gov/files/sec-2019-annual-report-whistleblower-program.pdf).
---------------------------------------------------------------------------

    The rule might dissuade individuals who are permanently barred from
providing information in the future about possible securities law
violations. We believe that this potential cost of the final rule could
be mitigated by a number of factors.
    First, the number of individuals who may be permanently barred by
the final rule for submitting three or more frivolous applications and
who might subsequently have information about possible securities law
violations that could be provided to the Commission is likely to be a
small fraction of the population of meritorious award applicants,
limiting the potential cost of the final rule. Through July 24, 2020,
we have found that individuals that submitted three or more award
applications make up approximately nine percent of the population of
covered action award applicants. This estimate constitutes an upper
bound of the actual fraction of applicants who submitted three or more
frivolous applications and subsequently had information about possible
securities law violations that could be provided to the
Commission.\367\
---------------------------------------------------------------------------

    \367\ To date, approximately 11 applicants submitted three or
more applications who were determined to be potentially meritorious
and not frivolous with respect to at least one of their
applications.
---------------------------------------------------------------------------

    Second, as discussed in the proposal, the Commission has issued two
final orders that have permanently barred the applicants from
submitting any further whistleblower award applications based on
violations of Rule 21F-8(c)(7). Given that the final rule codifies the
Commission's current practice, we believe that individuals who have
been barred on the basis of Rule 21F-8(c)(7) could have already taken
such current practice into account when deliberating on whether to
report, even in the absence of the final rule.
    Finally, as discussed in the adopting release that accompanied the
original whistleblower rules, whistleblowing is an individual decision
that is generally guided by a complex mix of pecuniary elements and
non-pecuniary elements.\368\ Individuals that are permanently barred
from applying for whistleblower awards might still come forward and
provide information about possible violations if they are sufficiently
motivated by non-pecuniary elements.\369\
---------------------------------------------------------------------------

    \368\ See Securities Whistleblower Incentives and Protections
Adopting Release, 76 FR at 34355, note 433.
    \369\ Id. An example of a non-pecuniary element is a sense of
``doing the right thing.''
---------------------------------------------------------------------------

    We also acknowledge the possibility that individuals who have made
fewer than three frivolous award applications might be discouraged from
reporting possible securities law violations because their next award
application could be determined to be frivolous, which would increase
the likelihood of a permanent bar from making any future award
applications. We believe that this potential cost of the final rule
could be mitigated by a number of factors.
    First, claimants may withdraw an application that the Office of the
Whistleblower has assessed to be frivolous for up to three such
applications. Second, the claims adjudication processes should help
ensure that potentially meritorious claims will be considered as such
by the Commission. Third, as discussed above, whistleblowing is an
individual decision that is generally guided by a complex mix of
pecuniary elements and non-pecuniary elements.\370\ Any individual may
come forward and provide information about possible violations if she
is sufficiently motivated by non-pecuniary elements.\371\
---------------------------------------------------------------------------

    \370\ See Securities Whistleblower Incentives and Protections
Adopting Release, 76 FR at 34355, note 433.
    \371\ Id. and note 409.
---------------------------------------------------------------------------

    The final rule could further help protect investors and the public
from potential harm that may flow from the provision of a materially
false, fictitious, or fraudulent statement or representation, or false
writing or document with the intent of misleading or otherwise
hindering the Commission or another governmental entity. This benefit
could arise from the permanent bar as well as the deterrent effect that
discourages conduct prohibited by Rule 21F-8(c)(7), each of which is
mentioned above.
    As noted above, nearly all commenters supported the proposed rule.
One commenter recommended not allowing unlimited opportunities to
withdraw applications deemed frivolous.\372\ The Commission shares the
commenter's view that the opportunities to withdraw frivolous
applications should be limited. Granting unlimited opportunities to
withdraw frivolous applications would not curtail the submission of
frivolous claims and by lowering the cost of withdrawing, could give
rise to more frivolous claims. Such an outcome likely would consume
staff resources without generating commensurate benefits in terms of
detecting securities violations and protecting investors. Thus, final
Rule 21F-8(e) provides that an individual may withdraw the initial
three applications that are deemed frivolous. The final rule balances
efficiency of awards processing, providing fair notice to claimants of
consequences of filing frivolous claims, and allowing a claimant--once
informed that a claim has been determined frivolous--subsequently to
submit a meritorious claim. In this regard, the process seeks to
efficiently reject frivolous claims without unilaterally foreclosing
the opportunity to submit information and potentially submit a
meritorious claim.
---------------------------------------------------------------------------

    \372\ See Anonymous-9 Letter.
---------------------------------------------------------------------------

7. Rule 21F-18
    Rule 21F-18(a) provides that the Office of the Whistleblower may
use a summary disposition process to deny any award application that
falls within any of the following categories: (1) Untimely award
application; \373\ (2) noncompliance with the requirements of Rule 21F-
9, which concerns the manner for submitting a tip to qualify as

a whistleblower and to be eligible for an award; (3) claimant's
information was never provided to or used by the staff handling the
covered action or the underlying investigation (or examination), and
those staff members otherwise had no contact with the claimant; (4)
noncompliance with Rule 21F-8(b), which requires an applicant to submit
supplemental information that the Commission may require \374\ and to
enter into a confidentiality agreement; or (5) failure to specify in
the award application the submission that the claimant made pursuant to
Rule 21F-9(a) upon which the claim to an award is based. Rule 21F-18(b)
specifies the procedures that shall apply to any award application
designated for summary disposition.
---------------------------------------------------------------------------

    \373\ The time periods for submitting an award application are
specified in Rule 21F-10(b) and Rule 21F-11(b).
    \374\ The authority to require additional information of an
applicant is delegated to the Office of the Whistleblower. See Rule
21F-10(d).
---------------------------------------------------------------------------

    The final rule could reduce the diversion of staff resources and
time that it might otherwise take to process claims that may be
rejected on straightforward grounds. An award application that is
processed by the final summary disposition process would not require
the CRS to review the record, issue a Preliminary Determination,
consider any written response filed by the claimant, or issue the
Proposed Final Determination; these functions would be assumed by the
Office of the Whistleblower. The summary disposition process
incorporates two other modifications. First, the 30-day period for
replying to a Preliminary Summary Disposition is shorter than the time
period for replying to a Preliminary Determination provided for in
Rules 21F-10(e)(2) and 21F-11(e)(2). This shorter period should be
sufficient for a claimant to reply and is appropriate given that the
matters subject to summary disposition should be relatively
straightforward. Second, a claimant would not have the opportunity to
receive the full administrative record upon which the Preliminary
Summary Disposition was based. Instead, the Office of the Whistleblower
would (to the extent appropriate given the nature of the denial)
provide the claimant with a staff declaration that contains the
pertinent facts upon which the Preliminary Summary Disposition is
based. This modification from the record-review process specified in
Rules 21F-10 and 21F-11 should still afford any claimant a sufficient
opportunity to provide a meaningful reply to a Preliminary Summary
Disposition. This should eliminate the delay that can arise when a
claimant does not expeditiously request the record (which, in turn,
delays the start of the 60-day period for a claimant to submit a
response to a preliminary determination); elimination of these delays
should help further expedite the summary adjudication process that we
are adopting.
    As with Rule 21F-8(e), staff resources that are freed up as a
result of the final rule could be devoted to processing potentially
meritorious award applications or with other work related to the
whistleblower program. This, in turn, could expedite the processing of
potentially meritorious award applications. To the extent that faster
processing of potentially meritorious award applications motivates
whistleblowing, individuals may be more likely to come forward and
report potential violations as a result of the final rule.
    We acknowledge the potential that certain aspects of the final rule
might make it marginally more difficult for whistleblowers to respond
to the denial of award applications (specifically the shorter time
period to respond to the Preliminary Summary Disposition). Thus, it
could be possible that the final rule might reduce the whistleblowing
incentives of those individuals who consider the ease of responding to
award application denials when deciding whether to come forward and
report potential violations.
    However, certain factors substantially limit this potential for
increased difficulties for whistleblowers. First, given that the
matters subject to summary disposition should be relatively
straightforward, we believe that the 30-day period for replying to a
Preliminary Summary Disposition and the provision of a staff
declaration (where applicable) should afford any claimant a sufficient
opportunity to provide a meaningful reply to a Preliminary Summary
Disposition. Second, as discussed above, the final rule may only be
used to deny award applications that fall under certain restricted
categories. Third, as discussed in the adopting release that
accompanied the original whistleblower rules, whistleblowing is an
individual decision that is generally guided by a complex mix of
pecuniary elements and non-pecuniary elements.\375\ Individuals who may
be concerned with the ease of responding to award application denials
may still come forward and provide information about possible
violations if they are sufficiently motivated by non-pecuniary
elements.
---------------------------------------------------------------------------

    \375\ See Securities Whistleblower Incentives and Protections
Adopting Release, 76 FR at 34355, note 433.
---------------------------------------------------------------------------

    As noted above, commenters were mixed in their reception of the
rule. Commenters who supported it underscored the possibility that the
process would promote efficiency of resources, while some commenters
opposed it due to the unclear effect it would have on the existing
queue of claims. We note that staff from the Office of the
Whistleblower have found that the categories encompassed by this rule
have consumed a disproportionate amount of time and staff resources
without a corresponding benefit. Based on this input, we believe this
rule should allow staff to more efficiently process claims and deal
with the existing queue of claims while continuing to provide
appropriate due process to claimants.
8. Interpretive Guidance Regarding the Meaning and Application of
``Independent Analysis'' as Defined in Exchange Act Rule 21F-4(b)(3)
    The interpretive guidance adopted in the final rule does not change
the existing rules, but merely clarifies the meaning of ``independent
analysis'' as that term is defined in Exchange Act Rule 21F-4 and
utilized in the definition of ``original information.'' As discussed
earlier, a whistleblower's examination and evaluation of publicly
available information does not constitute ``analysis'' if the facts
disclosed in the public materials on which the whistleblower relies and
in other publicly available information are sufficient to raise an
inference of the possible violations alleged in the whistleblower's
tip. In order for a whistleblower to be credited with ``analysis,'' the
whistleblower's examination and evaluation should contribute
``significant independent information'' that ``bridges the gap''
between the publicly available information and the possible securities
violations. Assuming that a whistleblower's submission meets the
threshold requirement that it constitutes ``independent analysis,'' for
the whistleblower to be eligible for an award the ``information that .
. . is derived from the . . . [whistleblower's] analysis'' must also be
of such high quality that it leads to a successful enforcement action.
    The interpretive guidance could potentially reduce the
whistleblowing incentives of those individuals who wish to satisfy the
``independent analysis'' prong of the ``original information''
requirement by examining publicly available information and providing
observations that do not go

beyond the information itself and reasonable inferences to be drawn
therefrom. In light of the interpretive guidance, these individuals may
decide not to provide such public information knowing that such
information would not be credited as ``independent analysis'' and
therefore not be eligible for a whistleblower award. While not
qualifying as ``independent analysis,'' to the extent that the
provision of reasonable inferences or observations that do not go
beyond public information itself improves Commission enforcement or
otherwise provides a benefit, any potential reduction in such provision
could be a cost associated with the interpretive guidance.
Nevertheless, individuals who are aware that public information would
not be credited with ``independent analysis'' may still come forward
and provide reasonable inferences or observations that do not go beyond
public information itself to the Commission if they are sufficiently
motivated by non-pecuniary elements.
    The interpretive guidance could increase the whistleblowing
incentives of those individuals who possess ``significant independent
information'' that ``bridges the gap'' between publicly available
information (and reasonable inferences therefrom) and the conclusion
that possible securities violations are indicated, but, in the absence
of the guidance, may have decided against reporting to the Commission
because of the perceived ambiguity in the meaning of ``independent
analysis.'' To the extent that these individuals come forward and
report such significant independent information to the Commission in
light of the interpretive guidance, the quantity and quality of
reported information might increase, which in turn might improve the
Commission's ability to enforce the Federal securities laws, detect
violations, and deter potential future violations. Further, the
clarification afforded by the interpretive guidance might also reduce
the number of award applications that are made solely on the basis of
the provision of public information and do not meet the ``independent
analysis'' threshold.
    We are adopting an additional interpretation regarding information
from sources that are technically public, but may be largely
inaccessible to individuals without specialized knowledge. This
additional guidance should benefit submitters of this type of
information and others who devote substantial time and effort and
develop unique insights from bringing together information from
multiple specialized or difficult-to-obtain sources. To the extent that
the number of claims that fail to meet the ``independent analysis''
threshold declines as a result of the interpretive guidance, staff
resources could be freed up and devoted to processing potentially
meritorious award applications and other work related to the
whistleblower program as discussed earlier.

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

    The Commission believes that the amendments make incremental
changes to its whistleblower program. Thus, the Commission does not
anticipate the effects on efficiency, competition, and capital
formation to be significant. The Commission did not receive comments
that address the discussion of efficiency, competition, and capital
formation in the proposal.
    The final rules could have a positive indirect impact on investment
efficiency and capital formation by increasing the incentives of
potential whistleblowers to provide information on possible
violations.\376\ Providing such information could increase the
effectiveness of the Commission's enforcement activities. More
effective enforcement could lead to earlier detection of violations and
increased deterrence of potential future violations, which should
assist in a more efficient allocation of investment funds.
---------------------------------------------------------------------------

    \376\ See supra Section VI.B. for a discussion of how final
Rules 21F-2(d)(1)(iii), 21F-4(d)(3), 21F-6(c), 21F-8(e), 21F-18, and
the interpretive guidance could increase whistleblowing incentives.
---------------------------------------------------------------------------

    Serious securities frauds, for example, can cause inefficiencies in
the economy by diverting investment funds from more legitimate,
productive uses. If investors fear theft, fraud, manipulation, insider
trading, or conflicted investment advice, their trust in the markets
will be low, in both the primary market for issuance and the secondary
market for trading.\377\ This would prompt investors to demand a higher
risk premium for holding securities, increasing the cost of raising
capital and impairing capital formation (relative to the case where
rules against such abuses were in effect and properly enforced and
obeyed). To the extent that the final rules increase deterrence of
potential future violations, investors' trust in the securities markets
would also increase. This increased investor trust will promote lower
capital costs as more investors enter the market, and as investors
generally demand a lower risk premium due to a reduced likelihood of
securities fraud.\378\ This, too, should promote the efficient
allocation of capital formation.
---------------------------------------------------------------------------

    \377\ Giannetti and Wang (2016) show that, after the revelation
of corporate fraud in a state, household stock market participation
in that state decreases. Households decrease holdings in fraudulent
as well as nonfraudulent firms, even if they do not hold stocks in
fraudulent firms. This finding is consistent with the revelation of
corporate fraud reducing investors' trust and participation in the
stock market. See Mariassunta Giannetti and Tracy Yue Wang,
Corporate scandals and household stock market participation, 71 J.
Fin. 2591 (2016) (available at https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12399).
    \378\ See Ko, K. Jeremy, ``Economics Note: Investor
Confidence,'' October 2017 (available at https://www.sec.gov/files/investor_confidence_noteOct2017.pdf).
---------------------------------------------------------------------------

    At the same time, some of the final rules could reduce
whistleblowing incentives in certain cases, although any such reduction
in whistleblowing incentives--to the extent that it occurs--is
justified in light of the potential for positive indirect impact on
investment efficiency and capital formation discussed above. Rule 21F-
8(e) might reduce the whistleblowing incentives of (i) those
individuals who are permanently barred under the final rule from
submitting award applications and (ii) to a lesser extent, those
individuals who have made fewer than three frivolous award
applications. Additionally, Rule 21F-18 might reduce the whistleblowing
incentives of those individuals who consider the ease of responding to
award application denials when deciding whether to come forward and
report potential violations. Further, the interpretive guidance might
reduce the whistleblowing incentives of those individuals who wish to
rely on the provision of solely public information to satisfy the
``independent analysis'' prong of the ``original information''
requirement for a whistleblower award. Yet these potential reductions
in whistleblowing incentives may be limited for reasons discussed
earlier.
    We believe that Rule 21F-6(c) should enhance the whistleblowing
incentives of those individuals who anticipate receiving awards that do
not exceed $5 million by increasing their anticipated award to an
amount of up to $5 million, and this in turn may have positive (albeit
indirect) impacts on efficiency and capital formation.
    The final rules could also improve other forms of efficiency. By
permanently barring applicants that make frivolous or fraudulent award
applications, final Rule 21F-8(e) could help free up staff resources
that could be used to expedite the processing of potentially
meritorious award applications as well as the payment of awards. As
discussed previously, to the extent that faster award application
processing and award payment motivate whistleblowing, individuals are
more likely to come forward and report

potential violations as a result of final Rule 21F-8(e) and final Rule
21F-18. To the extent that the final rules promote the timely reporting
of possible violations by increasing whistleblowing incentives and
prevent the provision of a materially false, fictitious, or fraudulent
statement or representation, or a false writing or document with intent
of misleading or otherwise hindering the Commission or another
governmental entity, the efficiency and speed in detecting violations
would be enhanced, which could reduce losses associated with the misuse
of resources and hasten public disclosure of such violations to
securities markets. To the extent that the final rule enables earlier
public disclosure of violations, which, in turn, allow rapid
incorporation of such news and information into prices and investors'
information sets, price and allocative efficiency of capital markets
could be improved.
    Similar to the effects on capital formation, the effects of the
final rules on competition would be indirect, and would flow from their
effects on whistleblowing incentives. To the extent that the final
rules increase the likelihood of detecting misconduct by increasing
whistleblowing incentives, the final rules could reduce the unfair
competitive advantages that some companies can achieve by engaging in
undetected violations.\379\ Conversely, to the extent that the final
rules decrease the likelihood of detecting misconduct by reducing
whistleblowing incentives, the final rules could increase the unfair
competitive advantages that some companies can achieve by engaging in
undetected violations.
---------------------------------------------------------------------------

    \379\ See 76 FR at 34362.
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    Section 603(a) of the Regulatory Flexibility Act \380\ requires the
Commission to undertake a regulatory flexibility analysis of rules it
is adopting unless the Commission certifies that the rules would not
have a significant economic impact on a substantial number of small
entities.\381\ In the Proposing Release the Commission requested public
comment on its preliminary regulatory-flexibility analysis but received
none.
---------------------------------------------------------------------------

    \380\ 5 U.S.C. 603(a).
    \381\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    Small authority is defined in 5 U.S.C. 601(6) to mean ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction'' as defined in 5 U.S.C. 601(3) through (5). The
definition of ``small authority'' does not include individuals. As
explained in the Proposing Release, the rules apply only to an
individual, or individuals acting jointly, who provide information to
the Commission relating to the violation of the securities laws.
Companies and other entities are not eligible to participate in the
whistleblower program as whistleblowers. Consequently, the persons that
will be subject to the amended rules are not ``small entities'' for
purposes of the Regulatory Flexibility Act.
    For the reasons stated above, the Commission certifies, pursuant to
5 U.S.C. 605(b) of the Regulatory Flexibility Act, that the rules would
not have a significant economic impact on a substantial number of small
entities.

VIII. Statutory Basis

    The Commission is adopting rule amendments, as well as the removal
of references to various forms, contained in this document under the
authority set forth in Sections 3(b), 21F, and 23(a) of the Exchange
Act.

List of Subjects

17 CFR Part 240

    Administrative practice and procedure; Brokers; Confidential