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Appealing an SEC Whistleblower Award Determination


SEC Whistleblowers Denied Multimillion-Dollar Award

On August 31, 2017, two whistleblowers appealed to the Second Circuit the SEC’s denial of a whistleblower award related to a 2012 enforcement action against Syntax-Brillian Corporation. According to the court filings, the whistleblowers provided information to the SEC that led to $60 million in civil fraud judgments against the company and its officers. The whistleblowers, however, failed to apply for an award within 90 days of the SEC posting the Notice of Covered Actions as required by the SEC Whistleblower Program’s rules. In fact, the whistleblowers did not apply for the award until nearly two years after SEC issued a notice of covered action.

This unfortunate outcome for these whistleblowers underscores the value of retaining an experienced SEC whistleblower attorney to avoid similar pitfalls. Knowing the rules can make the difference between recovering a multimillion-dollar whistleblower award and not receiving any award at all.

This article describes the process to apply for an SEC whistleblower award and appeal an SEC whistleblower award determination.  We are one of the few firms that have successfully appealed a preliminary SEC whistleblower award determination.

If you have original information that you would like to report to the SEC Office of the Whistleblower, contact the Director of our SEC Whistleblower Practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential.

In conjunction with our courageous clients, our SEC whistleblower lawyers have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies, and return funds to defrauded investors.

Preliminary SEC Whistleblower Award Determination

After a whistleblower applies for an SEC whistleblower award (by submitting a completed Form WB-APP within 90 calendar days of the SEC posting the Notice of Covered Action), the SEC Whistleblower Office’s Claims Review Staff will review the application in accordance with the rules of the SEC Whistleblower Program and make a preliminary award determination. The Claims Review Staff may base this determination on:

  • The whistleblower’s Form TCR;
  • The whistleblower’s Form WB-APP;
  • Sworn declarations from the SEC staff that worked on the enforcement action;
  • The enforcement action’s orders and pleadings; and
  • Other appropriate materials as detailed in 17 C.F.R. § 240.21F-12(a).

After the Claims Review Staff makes its preliminary determination (recommending whether to issue an award and the proposed award amount), it will send the whistleblower a written notification of the determination and an explanation of the whistleblower’s rights in the awards claims process. At this point, the whistleblower will have 30 calendar days to:

  • Request the record that was used by the Claims Review Staff in making the preliminary determination; and/or
  • Request a meeting with the SEC Whistleblower Office staff to discuss the preliminary determination (however, such meetings are not required and the office may decline the request). See Rule 21-F10.

Appealing the Preliminary SEC Whistleblower Award Determination

Whistleblowers can appeal the Claims Review Staff’s preliminary determination to deny an award or, in the event the preliminary determination recommends the granting of an award, the amount of the award.  The deadline for submitting an appeal is 60 calendar days from the later of: (i) the date of the preliminary award determination, or (ii) the date when the SEC Whistleblower Office made materials available for review.

If a whistleblower chooses to appeal the preliminary determination, they will receive a written acknowledgment that the SEC Whistleblower Office received the appeal. Thereafter, the Claims Review Staff will consider the whistleblower’s response, along with any supporting documentation provided, and will make its proposed final determination. See Rule 21-F10.

If a whistleblower chooses not to appeal a preliminary determination or fails to appeal in a timely manner, the preliminary determination will become the SEC’s final order (except where the preliminary determination recommends granting an award, in which case it will become a proposed final determination). Importantly, a whistleblower’s failure to contest a preliminary determination will constitute a failure to exhaust administrative remedies, and the whistleblower will be prohibited from appealing the determination to a United States Court of Appeals. See Rule 21-F10. 

Proposed Final Award Determination and SEC Final Order

After the preliminary determination becomes the proposed final determination, the whistleblower and the SEC will receive written notification of the determination. Within 30 days of receiving this notification, any Commissioner can request a full review of the proposed final determination. If there is no requested review within 30 days, the proposed final determination will become the SEC’s final order. See Rule 21-F10. 

Appealing SEC Whistleblower Award Determination to United States Court of Appeals

If the SEC denies an award to a whistleblower, the whistleblower may file an appeal in the appropriate United States Court of Appeals (either the United States Court of Appeals for the District of Columbia Circuit, or to the circuit where the aggrieved person resides or has his or her principal place of business) within 30 days of the issuance of the decision. If the SEC issues an award to the whistleblower of between 10 to 30 percent of the monetary actions collected in the action, the whistleblower may not appeal the award determination if the award was made in accordance with subsection (b). See Rule 21F-13.

SEC Office of the Whistleblower Approach to Processing Whistleblower Award Claims

Records Available to SEC Whistleblower

The Second Circuit’s recent decision in Hong v. SEC, 41 F. 4th 83 (2d Cir. July 21, 2022) clarifies the scope of records that a whistleblower can obtain for the appeal of an award determination:

“SEC regulations do not entitle Hong to “all records pertaining to the actions [the SEC] took upon receipt of Petitioner’s whistleblower [tip] in lieu of commencing a judicial or administrative proceeding,” Petitioner’s Reply Br. at 16, unless such records fall within the categories of documents the agency relies upon in making its award determination. See 17 C.F.R. §§ 240.21F-10(e)(1)(i) (applicant may request materials that formed the basis of the preliminary determination), 240.21F-12(a) (listing six categories of materials that the SEC may rely upon to make an award determination). An applicant is not entitled to “any materials (including any pre-decisional or internal deliberative process materials that are prepared exclusively to assist the Commission in deciding the claim) other than those listed” in the relevant regulations. 17 C.F.R. § 240.21F-12(b); see also Kilgour, 942 F.3d at 124 (rejecting petitioner’s argument that the SEC violated his due process rights by refusing to turn over certain documents, because they were “not included within the materials that [petitioner] is entitled to review under Rule 21F-12(a)”); Doe v. Sec. & Exch. Comm’n, 846 F. App’x 1, 5 (D.C. Cir. 2021) (concluding that whistleblower was not “entitled to all the information the Commission used in reaching the settlements” beyond those materials specified in Rule 21F-12(a)).”

SEC Whistleblower Reward Program

The SEC Whistleblower Reward Program has been very successful.  Indeed, as discussed in a recent Forbes article, whistleblower disclosures have enabled the SEC to recover more than $2.7 billion in penalties and protect investors by halting ongoing fraud schemes. To learn more about the SEC Whistleblower Program, download the eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

SEC Whistleblower Attorneys

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He represents whistleblowers around the world in SEC, CFTC and IRS whistleblower claims. He is also a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor.