The text of the Grimm Act contains (at least) eight threats to whistleblowers. Click on each threat to see the related bill language.

1. Gag Orders Legalized
2. Workplace Retaliation Legalized
3. Law Enforcement Crippled
4. Whistleblower Anonymity Destroyed
5. Corporate Accountability Minimized
6. Most Whistleblowers Disqualified
7. Awards Program Broken
8. Justice Obstructed

To amend the Securities Exchange Act of 1934 and the Commodity Exchange Act to modify certain provisions relating to whistleblower incentives and protection.

July 11, 2011

Mr. GRIMM (for himself, Mr. GARRETT, Mr. STIVERS, and Mr. CAMPBELL) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To amend the Securities Exchange Act of 1934 and the Commodity Exchange Act to modify certain provisions relating to whistleblower incentives and protection.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Whistleblower Improvement Act of 2011'.

SEC. 2. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

(a) Exclusion of Certain Compliance Officers and Internal Reporting as a Condition of Award- Section 21F of the Securities Exchange Act of 1934 (15 U.S.C. 78u-6) is amended--

(1) in subsection (b), by redesignating paragraph (2) as paragraph (3) and inserting after paragraph (1) the following:

`(2) INTERNAL REPORTING REQUIRED- In the case of a whistleblower who is an employee providing information relating to misconduct giving rise to the violation of the securities laws that was committed by his or her employer or another employee of the employer, to be eligible for an award under this section, the whistleblower, or any person obtaining reportable information from the whistleblower, shall--

`(A) first report the information described in paragraph (1) to a person at his or her employer with legal, compliance, financial reporting, or similar responsibilities, or to the board of directors, or a committee thereof, of such employer, before reporting such information to the Commission; and

`(B) report such information to the Commission not later than 180 days after reporting the information in accordance with subparagraph (A).'; and

(2) in subsection (c)(2)--

(A) in subparagraph (C), by striking `or' at the end; and

(B) by redesignating subparagraph (D) as subparagraph (G) and inserting after subparagraph (C) the following:

`(D) to any whistleblower who fails to first report the information described in subsection (b)(1) that is the basis for the award in accordance with subsection (b)(2)(A) before reporting such information to the Commission, in the case where the misconduct giving rise to the violation of the securities laws was committed by such employer or an employee of the employer, unless the whistleblower alleges and the Commission determines that the employer lacks either a policy prohibiting retaliation for reporting potential misconduct or an internal reporting system allowing for anonymous reporting, or the Commission determines in a preliminary investigation not exceeding 30 days that internal reporting was not a viable option for the whistleblower based on--

`(i) evidence that the alleged misconduct was committed by or involved the complicity of the highest level of management; or

`(ii) other evidence of bad faith on the part of the employer;

`(F) to any whistleblower who has legal, compliance, financial reporting, or similar responsibilities for or on behalf of an entity and has a fiduciary or contractual obligation to investigate or respond to internal reports of misconduct or violations or to cause such entity to investigate or respond to the misconduct or violations, if the information learned by the whistleblower during the course of his or her duties was communicated to such a person with the reasonable expectation that such person would take appropriate steps to so respond; or'.

(E) to any whistleblower who fails to report the information described in subsection (b)(1) that is the basis for the award to the Commission within 180 days of reporting such information in accordance with subsection (b)(2)(A);

(b) Elimination of Minimum Award Requirement- Subsection (b)(1) of such section is amended--

(1) by striking `shall' and inserting `may'; and

(2) by striking `in an aggregate amount equal to--' and all that follows and inserting `an amount determined by the Commission but not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.'.

(c) Exclusion of Whistleblowers Found Culpable- Subsection (c)(2)(B) of such section is amended by inserting `, is found civilly liable, or is otherwise determined by the Commission to have committed, facilitated, participated in, or otherwise been complicit in misconduct related to such violation' after `violation'.

(d) Rule of Construction Relating to Other Workplace Policies- Subsection (h)(1) of such section is amended by adding at the end the following:

`(D) RULE OF CONSTRUCTION- Nothing in this paragraph shall be construed as prohibiting or restricting any employer from enforcing any established employment agreements, workplace policies, or codes of conduct against a whistleblower, and any adverse action taken against a whistleblower for any violation of such agreements, policies, or codes shall not constitute retaliation for purposes of this paragraph, provided such agreements, policies, or codes are enforced consistently with respect to other employees who are not whistleblowers.'.

(e) Notification to Employer- Paragraph (2) of subsection (h) of such section is amended--

(1) in the paragraph heading, by striking `CONFIDENTIALITY' and inserting `NOTIFICATION TO EMPLOYER AND CONFIDENTIALITY';

(2) by redesignating subparagraph (A) through (D) as subparagraphs (B) through (E), respectively;

(3) by inserting a new subparagraph (A) as follows:

`(A) NOTIFICATION-

'(i) NOTIFICATION TO EMPLOYER– The Commission and any officer or employee of the Commission may disclose to the employer such information provided by the whistleblower to the Commission, and in the case where an employer is an issuer the Commission shall disclose to the employer's audit committee (as defined in section 3(a)(58) of this title) such information provided by the whistleblower to the Commission that reasonably could impact the quality of financial reporting by an issuer, including any information within the scope of section 301 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 78j-1(m)(4)).

`(ii) NOTIFICATION REQUIRED PRIOR TO ENFORCEMENT- Prior to commencing any enforcement action relating in whole or in part to any information reported to it by a whistleblower, the Commission shall promptly notify any entity that is to be subject to such action of information received by the Commission from a whistleblower who is an employee of such entity to enable the entity to investigate the alleged misconduct and take remedial action in light of any new information provided by the Commission, unless the Commission determines in the course of a preliminary investigation of the alleged misconduct, not exceeding 30 days, that such notification would jeopardize necessary investigative measures and impede the gathering of relevant facts, based on--

`(I) evidence that the alleged misconduct was committed by or involved the complicity of the highest level management of the entity; or

`(II) other evidence of bad faith on the part of the entity.

`(iii) GOOD FAITH- Where an entity notified under clause (i) responds in good faith, which may include conducting an investigation, reporting results of such an investigation to the Commission, and taking appropriate corrective action, the Commission shall treat the entity as having self-reported the information and its actions in response to such notification shall be evaluated in accordance with the Commission's policy statement entitled `Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Statement of the Relationship of Cooperation to Agency Enforcement Decisions'.

`(iv) OBLIGATION NOT TO RETALIATE.—The notification provided to an entity under clause (ii) shall advise the entity of its statutory obligation not to retaliate against the whistleblower who provided the information received by the Commission.'; and

(4) in the heading of subparagraph (B) (as redesignated by paragraph (3)), by striking `IN GENERAL' and inserting `CONFIDENTIALITY'.

SEC. 3. AMENDMENTS TO THE COMMODITY EXCHANGE ACT.

(a) Exclusion of Certain Compliance Officers and Internal Reporting as a Condition of Award- Section 23 of the Commodity Exchange Act (7 U.S.C. 26) is amended--

(1) in subsection (b), by redesignating paragraph (2) as paragraph (3) and inserting after paragraph (1) the following:

`(2) INTERNAL REPORTING REQUIRED- In the case of a whistleblower who is an employee providing information relating to misconduct giving rise to the violation of the securities laws that was committed by his or her employer or another employee of the employer, to be eligible for an award under this section, the whistleblower, or any person obtaining reportable information from the whistleblower, shall--

`(A) first reported the information described in paragraph (1) to his or her employer before reporting such information to the Commission; and

`(B) report such information to the Commission not later than 180 days after reporting the information to the employer.'; and

(2) in subsection (c)(2)--

(A) in subparagraph (C), by striking `or' at the end; and

(B) by redesignating subparagraph (D) as subparagraph (F) and inserting after subparagraph (C) the following:

`(D) to any whistleblower who fails to first report the information described in subsection (b)(1) that is the basis for the award to his or her employer before reporting such information to the Commission, in the case where the misconduct giving rise to the violation of the securities laws was committed by such employer or an employee of the employer, unless the whistleblower alleges and the Commission determines that the employer lacks either a policy prohibiting retaliation for reporting potential misconduct or an internal reporting system allowing for anonymous reporting, or the Commission determines in a preliminary investigation not exceeding 30 days that internal reporting was not a viable option for the whistleblower based on--

`(i) evidence that the alleged misconduct was committed by or involved the complicity of the highest level of management; or

`(ii) other evidence of bad faith on the part of the employer;

`(E) to any whistleblower who has legal, compliance, or similar responsibilities for or on behalf of an entity and has a fiduciary or contractual obligation to investigate or respond to internal reports of misconduct or violations or to cause such entity to investigate or respond to the misconduct or violations, if the information learned by the whistleblower on the course of his or her duties was communicated to such a person with the reasonable expectation that such person would take appropriate steps to so respond; and'.

(b) Cap on Award in Certain Circumstances and Elimination of Minimum Award Requirement- Subsection (b)(1) of such section is amended--

(1) by striking `shall' and inserting `may'; and

(2) by striking `in an aggregate amount equal to--' and all that follows and inserting `in an amount determined by the Commission but not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.'.

(c) Exclusion of Whistleblowers Found Culpable- Subsection (c)(2)(B) of such section is amended by inserting `, is found civilly liable, or is otherwise determined by the Commission to have committed, facilitated, participated in, or been complicit in misconduct related to such a violation' after `violation'.

(d) Rule of Construction Relating to Other Workplace Policies- Subsection (h)(1) of such section is amended by adding at the end the following:

`(D) RULE OF CONSTRUCTION- Nothing in this paragraph shall be construed as prohibiting or restricting any employer from enforcing any established employment agreements, workplace policies, or codes of conduct against a whistleblower, and any adverse action taken against a whistleblower for any violation of such agreements, policies, or codes shall not constitute retaliation for purposes of this paragraph, provided such agreements, policies, or codes are enforced consistently with respect to other employees who are not whistleblowers.'.

(e) Notification to Employer- Paragraph (2) of subsection (h) of such section is amended--

(1) in the paragraph heading, by striking `CONFIDENTIALITY' and inserting `NOTIFICATION TO EMPLOYER AND CONFIDENTIALITY';

(2) by redesignating subparagraph (A) through (D) as subparagraphs (B) through (E), respectively;

(3) by inserting a new subparagraph (A) as follows:

`(A) NOTIFICATION TO EMPLOYER-

`(i) NOTIFICATION REQUIRED- Prior to commencing any enforcement action relating in whole or in part to any information reported to it by a whistleblower, the Commission shall promptly notify any entity that is to be subject to such enforcement of information received by the Commission from a whistleblower who is an employee of such entity to enable the entity to investigate the alleged misconduct and take remedial action, unless the Commission determines in the course of a preliminary investigation not exceeding 30 days of the alleged misconduct, that such notification would jeopardize necessary investigative measures and impede the gathering of relevant facts, based on--

`(I) evidence that the alleged misconduct was committed by or involved the complicity of the highest level management of the entity; or

`(II) other evidence of bad faith on the part of the entity.

`(ii) GOOD FAITH- Where an entity notified under clause (i) responds in good faith, which may include conducting an investigation, reporting results of such an investigation to the Commission, and taking appropriate corrective action, the Commission shall treat the entity as having self-reported the information and its actions in response to such notification shall be evaluated accordingly.'; and

(4) in the heading of subparagraph (B) (as redesignated by paragraph (3)), by striking `IN GENERAL' and inserting `CONFIDENTIALITY'.

SEC. 4. STUDY.

The Comptroller General shall conduct a study to determine what impact, if any, the whistleblower incentives program established under section 21F of the Securities Exchange Act of 1934 (15 U.S.C. 78u-6) and section 23 of the Commodity Exchange Act (7 U.S.C. 26) has had on shareholder value, market integrity, taxpayer protection, mitigation of harms posed to investors, and the Commission's ability to successfully pursue enforcement actions. The Comptroller General shall transmit to Congress a report on the study not later than 18 months after the date of enactment of this Act.