SEC Whistleblower Lawyer Blog
A recent decision by the Securities & Exchange Commission’s Claims Review Staff left a whistleblower without an award they believed they earned. However, upon examination, the individual didn’t follow the rules, which include when they submit their information to the SEC.
In many of our blogs about SEC whistleblowers who receive a financial award from the SEC, the early submission and voluntary disclosure of information is a key component of this process. A whistleblower who uncovers misconduct or other wrongdoing should report this information internally to the company, if appropriate, as well as to the SEC, as soon as possible. Sending this information without a request and promptly is a requirement of the SEC’s Office of the Whistleblower’s program. One whistleblower recently discovered why acting in this order was very important.
The SEC Whistleblower Case Facts
An individual working for an unidentified company discovered that it was making false and misleading statements to its investors regarding compliance with a specific set of policies. Even though the company indicated in its public statements that it would be compliant and adopt these provisions, the company failed to do so.
The individual in this case then contacted a media outlet to discuss both the underlying misconduct and the failure to comply with these policies. The media outlet then published an article identifying both the individual and the company involved. Staff from the Securities and Exchange Commission then opened its investigation after reading the article.
Two days after publication, SEC staff contacted the individual directly to ask questions and obtain additional information. Following contact from SEC staff, the individual then submitted a Form TCR to the Commission that included the same information and allegations they previously submitted to the media outlet.
Ultimately, the SEC began cease-and-desist proceedings and settled an administrative action against one of the company’s subsidiaries. The SEC discovered that the subsidiary had made material misstatements after failing to adopt the policies and procedures designed to prevent the violations that occurred.
The SEC Whistleblower’s Claim
When the SEC’s Office of the Whistleblower posted a notice for the Covered Action on its public website, the individual submitted a timely whistleblower claim for an award. After review, the Claims Review Staff (CRS) issued a Preliminary Determination that denied this request for an award.
This individual knew of the misconduct and failed to report it to the SEC, only offering when contacted. Additionally, the individual provided this information to the media outlet rather than the SEC, allowing it to be publicly disseminated in an article. SEC staff learned of the misconduct by the company after reading the article and initiated its investigation.
Because the individual later submitted the TCR with the same information, but only after the SEC staff contacted them, it did not fall under the definition of “voluntary.”
The SEC’s Reasoning
The SEC’s “voluntary” rule is clearly stated on the Whistleblower website. Eligibility for an award is determined by information provided to the SEC before staff contacts the individual. Once the SEC makes contact requests for this information, it is no longer “voluntary” as required by the rules.
The individual providing the information believed their participation followed the rules after multiple statements from both the SEC staff and a related agency that their participation was voluntary. But what they did not understand was that although their continued participation was voluntary, it was only after the SEC made contact, not before. This was the deciding factor.
Even if legal counsel is representing the individual in an action, they must provide their information first to the SEC, regardless of whether they report internally. Submitting the TCR after an SEC request invalidates the “voluntary” aspect of submission, even if it was timely. Based on this rule, the CRS rejected the individual’s claim of a timely submission.
Retaining Experienced SEC Whistleblower Attorneys
Whistleblowers help everyone by notifying the SEC of conduct that harms the investing public, while also earning financial compensation for themselves. Hiring experienced SEC counsel may greatly increase the probability that the SEC will initiate an investigation based on your information. If you wish to remain anonymous, you must be represented by an attorney, who will submit everything on your behalf.
Silver Law Group and the Law Firm of David R. Chase jointly have experienced SEC whistleblower lawyers, including a former SEC Enforcement attorney on the team, so you will always have guidance throughout the process. Our SEC whistleblower attorneys can help you if you have information regarding securities or investment fraud, violations of federal securities laws, false filings, market manipulation, or other misconduct. You must provide timely, credible, and original information or analysis to be eligible.
Contact us through our online form or at (800) 975-4345 for a consultation. Our attorneys work on a contingency fee basis. This means that it costs you nothing to hire us, and we collect our fees only if you receive an SEC bounty. Because we get paid when you do, we have the incentive to help you collect the maximum award available.