SEC Denies Whistleblower Bounty to Claimant Seeking Five Awards

April 30, 2015

On April 27, 2015, the Securities And Exchange Commission ("SEC") announced it was denying whistleblower awards to one individual who claimed eligibility under five covered actions. Frankly, it's an impressive list of actions, so I've listed them all here:

SEC v. Citigroup Inc., Civil Action No. 1:10-CV-01277 Notice of Covered Action 2011-33
In the Matter of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Administrative Proceeding File No. 3-14204 Notice of Covered Action 2011-101
In the Matter of Navistar International Corporation, Daniel C. Ustian, Robert C. Lannert, Thomas M. Akers, Jr., James W. McIntosh, James J. Stanaway, Ernest A. Stinsa, Michael J. Schultz, Administrative Proceeding File No. 3-13994 Notice of Covered Action 2011-110
In the Matter of Wells Fargo Securities LLC (f/k/a Wachovia Capital Markets LLC), Adinistrative Proceeding File No. 3-14320 Notice of Covered Action 2011-162
In the Matter of Morgan Stanley Investment Management Inc., Administrative Proceeding File No. 3-14628 Notice of Covered Action 2011-211

READ: In the Matter of the Claims for Award (Order, '34 Act Release 74815; Whistleblowing Award Proc. File No. 2015-3 / April 27, 2015).

The SEC's Order acknowledges that all five applications were timely filed; however, each was responded to by the Claims Review Staff with a Preliminary Determination recommending denial. In explaining the basis for the denials, the Order asserts that as to four of the five Covered Actions, Claimant's tips were submitted "after those matters were settled." In light of that finding, Claimant's tips could not have led to a successful enforcement action (which is a predicate for entitlement for an award) because by the time the information was received, the enforcement action had already been successfully concluded via settlement.

As to the Morgan Stanley Investment Management, Inc. Covered Action, the SEC's Order asserted that following the submission of Claimant's tip, Staff determined to take "no further action" and did not forward the tip to any Staff assigned to the matter.

Finally, the Order offers this under Footnote 2:

2 Although not the basis for our decision, we note that the information provided by Claimant likely would not qualify as original information as defined in Rule 21F-4(b)(1) of the Exchange Act because it appears that the information was largely copied from a third party's publicly-available court filings.

Bill Singer's Comment

In my law practice, I have been approached by many wannabe whistleblowers whose tips are largely gleaned from published news stories and the so-called tip would largely be to tell the SEC to have its Staff ask questions about "this" or to demand the production of documents about "that." Hardly the stuff of a contingency-fee representation and hardly the grist for the SEC's whistleblower process. Consequently, the SEC seems to have reached the right decision with the reported denials.

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SEC Denies Whistleblower Bounty to Claimant Seeking Five Awards

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