The U.S. Securities and Exchange Commission (SEC) recently introduced new rules to improve financial compliance investigations by enticing employees to submit internal tips. The new rules--collectively referred to as the whistleblower program--were created by Congress in 2010 as part of the Dodd-Frank legislation. But although the program was authorized over a year ago, budget problems meant the final rules only became effective on August 12, 2011. FierceComplianceIT put together a brief overview of the program, which changes the way the SEC, employees and employers handle compliance issues.

But all the legislative delays mean the whistleblower program is still a very nascent concept for many financial executives. FierceComplianceIT has distilled the most pertinent facts from whistleblower program as reference to help understand and decode the "legalese" of the new rules. The following are some of the most important questions and answers executives need to know about the whistleblower program:

What information are my employees allowed to report under whistleblower program?  

Employees must:

• Provide the SEC with original information--based on the individual's independent knowledge or analysis--that is not already known to the commission and not derived exclusively from public sources.
• Provide information that leads to a successful enforcement action by the SEC of a federal court or administrative action. This includes information that was sufficiently specific, credible and timeline to aid in opening, aiding or closing an investigation.

My employee has provided information to the SEC. What Can I do now?

• Under the new rules, employers cannot retaliate against a whistleblower that has a reasonable belief that the information s/he is providing points to a possible securities law violation.
• Employers cannot interfere with a whistleblower's efforts to communication with the SEC. This includes making any threats to enforce an existing workplace confidentiality agreement.

Will the SEC treat all original tips as serious investigations? What if my employee just has an axe to grind?

The short answer is no. Here are more detailed requirements for submitting a tip:

• The whistleblower provision is designed to reward serious tips that would otherwise not be brought to the attention of the SEC.
• Tips that will not be recognized by the SEC include those that come from people already obligated to report to the commission, those that include illegally obtained information, foreign government officials, and compliance and internal audit personnel among others.

Should I worry about my internal compliance and audit personnel becoming whistleblowers?

These employees are still eligible to participate in the SEC program if:

• The whistleblower believes disclosure of the information will prevent substantial injury to the financial interest or property of the entity or investors.
• S/he believes the company is engaging in conduct that will hinder further SEC compliance investigation.
• If 120 days have passed since the information was reported to the audit committee or since the whistleblower first received the information.

Can my institution deal with compliance issues internally, before they reach the SEC?

The whistleblower is not required to report violations internally in order to qualify for an award. However:

• The SEC has designed the new rules to strengthen proposed incentives encouraging employees to utilize internal compliance programs when appropriate.
• Whistleblowers are eligible for SEC compensation if they report violations internally and the company informs the SEC about the violation.
• The SEC treats employees as whistleblowers as long as they provide the SEC with the same internally reported information within 120 days.
• Participating in internal compliance and reporting systems can increase the amount of a whistleblower award. Conversely, whistleblowers that interfere with internal compliance investigations can decrease the amount of the award.

Where can I go for more information about Dodd-Frank and the SEC's new whistleblower program?

• View the final rules of the SEC Whistleblower Program
• View the Office of the Whistleblower