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SEC Declines Paying a Whistleblower Because the Tip Was Provided Prior to Dodd-Frank

The SEC recently declined to pay a whistleblower award to a claimant that sought the SEC’s review of its stance on payouts stemming from information provided prior to the Dodd-Frank Act’s enactment in 2010.

In an SEC Order, the claimant provided whistleblower information to the SEC in 2007, three years before the Dodd-Frank Act.  According to Rule 21F-4(b)(1)(iv), all whistleblower payouts must be based on information provided to the SEC after the enactment of the law on July 21, 2010.

The Commission relied upon a 2015 Second Circuit decision that sided with the SEC in its refusal to award a whistleblower bounty for information provided prior to 2010.  The Second Circuit held that the whistleblower was ineligible for an award because the tip was provided prior to the Dodd-Frank Act

The SEC based its decision on the Dodd-Frank Act’s language, section 924(b), that required the SEC to treat any whistleblower information as eligible for an award if it was submitted after the act’s enactment in 2010, but before the implementation of any associated rules or amendments.

According to a statement issued by the SEC, Congress had considered, but eventually declined, to include a clause that would have allowed awards to be paid for information received prior to the enactment of the Dodd-Frank Act.

The SEC also declined the whistleblower’s request to delay ruling pending consideration of a petition seeking changes to eligibility rules.  The SEC stated: “We decline to delay the final resolution of this award application to allow the claimant to belatedly file such a rulemaking petition given that the commission’s position has been clear since our final rules were adopted in May 2011 and claimant could, therefore, have years earlier filed a rulemaking petition but did not do so.”

Under the SEC whistleblower program, established by the Dodd-Frank Act in 2011, the SEC is required to ardently protect confidentiality of whistleblowers and cannot disclose information that might indirectly or directly reveal a whistleblower’s identity.  This is the reason why items such as the percentage awarded, the violating company, and other information is redacted from the order above.

The whistleblower program offers confidentiality, protection from retaliation, and rewards fraud tipsters for reporting wrongdoing that leads to an SEC enforcement action in which over $1 million in sanctions is collected.  The award can range anywhere from 10 to 30 percent of the sanctions, according to the website.

Scott L. Silver, managing partner of the Silver Law Group, was an early proponent of the legislation and authored a primer on the SEC Whistleblower Program.  Our legal team includes David R. Chase, a former SEC prosecutor now working to protect whistleblowers.

Silver Law Group  and The Law Firm of David R. Chase are committed to the protection of whistleblowers through the whistleblower claim process and can prosecute your whistleblower claims.  If you have questions about your legal rights as a whistleblower, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.

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