1. Opening the Floodgates: The SEC’s Proposed Whistleblower Rules Nina (Nicki) Locker Steven Guggenheim Michael Winograd

2. Whistleblower Statute - Background The Genesis of the new rules –SEC’s lack of response to warnings re Madoff –Ineffective SEC bounty program before Dodd-Frank  Insider trading  10% awards  $160,000 to 5 claimants since 1989 –Lack of robust internal corporate reporting processes  SOX 301 2

3. Whistleblower Statute - Highlights Increased bounty payments –10 to 30 % of monetary sanctions collected by SEC Voluntary submission of original information –Derived from independent knowledge/analysis –Must not be legally obligated to provide information Broad eligibility for bounty –Employees, analysts, suppliers, customers Certain individuals not eligible for bounty –Attorneys, accountants, compliance personnel 3

4. Whistleblower Statute- Highlights No requirement to report internally Highly controversial Protections for whistleblowers –Confidentiality –Prohibits discrimination –Retaliation claims  Automatic remedies SEC can share whistleblower information with foreign governmental agencies 4

5. Impact on Publicly Traded Companies Significant increase in SEC enforcement activity –FCPA: where the real money is  2010: 12 FCPA investigations with a total of more than $500 million in monetary penalties  Increased due diligence in M&A context Employees will bypass internal compliance processes –No concrete incentive for reporting internally first  SEC “may” consider internal reporting in setting reward –Investigation, remediation and self-reporting might eliminate any monetary sanctions 5

6. How to Preserve the Role of Internal Corporate Reporting Acknowledgments and certifications –Acknowledge obligations in whistleblower policy –Periodically certify that known misconduct has been reported Incentivize reporting of potential violations –Establish and communicate whistleblower policies  Provide for confidentiality  Protect whistleblowers –Expand communication channels for internal reporting  Emails, mail, hotline Seek feedback on communication channels 6