A divided U.S. Securities and Exchange Commission approved a new program that would compensate whistleblowers whose tips lead to sanctions of over $1 million.
In a 3-2 vote on Wednesday, the SEC backed what has grown to become one of the most contentious provisions required under the Dodd-Frank Wall Street overhaul law.
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Whistleblowers whose tips lead to cases that result in sanctions exceeding $1 million can be eligible for a reward of between 10 percent to 30 percent of the total amount. Although the rule encourages whistleblowers to first report problems internally, it does not mandate it.
Today's rules are intended to the break the silence of those who see a wrong, said SEC Chairman Mary Schapiro.
She said the final rule struck the correct balance between encouraging whistleblowers to report problems internally when appropriate, while providing the option of heading directly to the SEC.
The SEC's two Republican commissioners voted against the rule and raised numerous concerns, from its impact on internal compliance to fears it may inundate the SEC with complaints that do not prove to be fruitful.
It significantly underestimates the negative impact on internal compliance programs and significantly overestimates our capacity to effectively triage and manage whistleblower complaints, said SEC Commissioner Kathleen Casey.
To promote internal reporting, the SEC has added some features to the rule such as making a whistleblower eligible for a reward if he or she reports wrongdoing to the company and the company, in turn, reports it to the SEC.
The U.S. Chamber of Commerce, one of the rule's biggest critics, said the SEC had put trial lawyer profits ahead of effective compliance.
Supporters of the rule, such as the National Whistleblowers Center, lauded the agency for resisting opposition from Wall Street lobbyists.
(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)