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Harry Cassin
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SEC awards $3.5 million to whistleblower, denies two other claims

The Securities and Exchange Commission Monday awarded a whistleblower about $3.5 million for original information that led to a successful enforcement action. Two other whistleblowers had their claims denied, and one of them appealed the decision.

The SEC didn’t identify the whistleblowers or the enforcement action the tip led to. By law, the agency has to protect the identity of whistleblowers.

Thirty-six SEC whistleblowers have now collected about $135 million since the first award in 2012.

Monday’s order (pdf) said “Claimant 2” appealed being denied an award. “Claimant 3” accepted the agency’s decision.

The SEC said Claimant 2’s information didn’t result in an SEC investigation, so there was no basis for an award.

Information can only lead to a successful enforcement action if it caused the SEC to open an investigation, reopen an investigation, or expand an ongoing investigation into a new area.

The SEC said Monday that none of Claimant 2’s information was used in the investigation.

Claimant 2 also missed the deadline for filing a whistleblower claim, the SEC said.

The SEC posts filing deadlines on its  website for each “Covered Action.”

“Covered Actions” are those where an order was entered with sanctions of more than $1 million, making them elegible for whistleblower awards.

Claimant 2 said posting filing deadlines on the SEC’s website isn’t adequate and the SEC should have provided “actual notice” of the filing deadline directly to Claimant 2.

The SEC rejected the argument. It said the “constructive notice” posted on its website was adequate and has worked well in other cases.

As we explained in our release accompanying the adoption of the whistleblower rules, this constructive notice procedure “provides the best mechanism to provide notice to all whistleblower claimants who may have contributed to the action’s success.” Moreover, our experience to date in the administration of our whistleblower program has confirmed that our constructive notice 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.

In Monday’s order, the SEC said “Claimant 2’s failure to timely submit an application [for a whistleblower award] is clear.”


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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