The Securities and Exchange Commission is seeking public comment on its proposed "whistleblower'' program, which is to provide financial reward to individuals who provide tips that lead to successful enforcement actions.

Comments on the proposed rule, which falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act, are due by December 17.

Under the proposed rule, no money would be awarded to a tipster unless the sanction won by the SEC exceeds $1 million. After that, the whistleblower would receive somewhere between $100,000 and $300,000 of each million brought in by the sanction.

The SEC describes its approach as a “simple, straightforward procedures for would-be whistleblowers” to provide information.

The original information  supplied must be based upon the whistleblower’s independent knowledge or independent analysis of information not known to the SEC and not derived from public sources.

The SEC is discouraging employees from front-running legitimate internal compliance programs by not allowing individuals who learn about violations through a company’s program to be compensated.

However, the exemption does not apply if the company does not disclose the information to the SEC within a reasonable time or acts in good faith.

The SEC is also recommending exemptions for employees with legal obligations such as lawyers, independent auditors and compliance personnel so they don’t “unfairly” reap financial rewards.

“We get thousands of tips every year, yet very few of these tips come from those closest to an ongoing fraud,” says SEC Chairman Mary Schapiro. “Whistleblowers can be a source of valuable firsthand information that may otherwise not come to light. These high-quality leads can be crucial to protecting investors and recovering ill-gotten gains from wrongdoers.”

Comments can be made here

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