SEC Whistleblower Award Rules:  The SEC Whistleblower Award Deadline

Claimant Is Responsible For Filing Before The SEC Whistleblower Award Deadline

The United States Securities and Exchange Commission (“SEC”) brought a successful action in which it collected over $1 million from the securities law violator(s).  The SEC’s Office of the Whistleblower (“OWB”) then posted a Notice of Covered Action (“NoCA”) for the case.  The NoCA listing set forth the SEC whistleblower award deadline for that case.

Three individuals filed applications for SEC whistleblower rewards.

The SEC’s Claims Review Staff (“CRS”) issued a Preliminary Determination.  In it, the Claims Review Staff recommended that one of the individuals be granted an SEC whistleblower reward of $3.5 million.

The Claims Review Staff denied the other two individuals’ applications for SEC whistleblower rewards.  One of the individuals did not challenge the Preliminary Determination.  The other individual, identified as “Claimant 2”, appealed the Claims Review Staff’s decision.

The Commission entered an Order approving the $3.5 million award to the first claimant, and denying any award to Claimant 2.

SEC whistleblower award deadline

The SEC Order

The SEC Is Not Required To Notify A Potential Award Claimant Directly About Their SEC Whistleblower Award Deadline

Two reasons were given in the Order for the Claims Review Staff’s decision to deny an award to Claimant 2.  One of those reasons was that Claimant 2 failed to submit a reward claim before the SEC whistleblower award deadline in the case had expired.

On appeal, Claimant 2 did not dispute that his or her award claim was filed after the SEC whistleblower award deadline had expired and therefore was untimely.  Instead, Claimant 2 argued that the SEC should have contacted him or her directly to let him or her know about the SEC whistleblower award deadline in the case, rather than just posting a Notice of Covered Action on the SEC’s website.

Rejecting this argument, the Commission cited to SEC whistleblower rule 21F-10(a).  The Order quotes Rule 21F-10(a):

[w]henever a Commission action results in monetary sanctions totaling more than $1,000,000, the Office of the Whistleblower will cause to be published on the Commission’s website a “Notice of Covered Action.”

The Commission explained that its experience with the SEC whistleblower program has confirmed that this procedure

… is a workable, productive, and fair mechanism for ensuring that individuals interested in making a timely whistleblower award claim receive appropriate notice of the deadline for submitting an award application.

The Order asserts that the consequence for failing to submit an award application before the deadline expires “is clear”:

As Rule 21F-10 unambiguously states, an award application that is not received by OWB within ninety (90) calendar days of the date of the Notice of Covered Action “will be barred.”

Because the Notice of Covered Action was posted on the SEC’s website, along with the filing deadline, the Commission found that proper notice had been given, and Claimant 2’s award application was barred.

Additional Information

For additional information about the SEC whistleblower award deadline, click on the link below: