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.
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Appealing SEC Whistleblower Preliminary Award Determination
Whistleblowers may 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. Whistleblowers must appeal the determination within 60 calendar days of 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
Finally, 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 request within 30 days, the proposed final determination will become the SEC’s final order, which will be promptly forwarded to the whistleblower.
For more information about the SEC’s claims review process and analysis of award applications, see the SEC’s opposition brief, which was filed in response to a whistleblower’s petition for mandamus alleging that the SEC denied him justice by unreasonably delaying a preliminary determination on his claim for a whistleblower award.
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 an 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 decision being issued. In Doe v. SEC, the court held the standard of review for an appeal of the SEC’s denial of an award is whether the SEC’s determination was based on “substantial evidence.” Doe v. SEC, 2018 U.S. App. Lexis 7449 No. 16-1414 (D.C. Cir. Mar. 20, 2018).
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.
To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:
- See our column in Forbes: One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective.
- See our column in Going Concern: Sarbanes-Oxley 15 Years Later: Accountants Need to Speak Up Now More Than Ever.
- See our post in Accounting Today: Whistleblower Protections and Incentives for Auditors and Accountants.
- See our article providing Tips for SEC Whistleblowers
What are the “monetary sanctions” from which the SEC determines the amount of a whistleblower award?
The monetary sanctions from which the SEC determines the amount of an award is not always equal to the penalty or other sanctions set forth in an enforcement action. Sometimes the defendant is unable to pay the sanction and the SEC waives part of the penalty. If the covered action assesses a penalty in excess of $1M, the whistleblower is eligible for an award, but monetary sanctions from which an award is determined is limited to the amount that the SEC actually collects.
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