TheCorporateCounsel.net

Although eye-popping whistleblower awards might make you think otherwise, the SEC is not throwing bags of cash at every [Redacted] who reaches out to them. An order issued by the Commission earlier this week serves as a warning to aspiring whistleblowers that they must exercise at least some discretion with their submissions.

The order not only denied a whistleblower’s award applications – it also permanently barred them from ever participating in the whistleblower program again. Here’s the background:

Claimant submitted three of the relevant award applications to the Office of the Whistleblower (“OWB”) in [Redacted]. Claimant bases these award claims on tips Claimant submitted alleging that Claimant lost $20,000,000,000,000 and became aware of misconduct involving an unnamed investment company, through, among other sources, account statements, broker-dealer records, publicly available information, SEC filings, and social media. Claimant lists – without any explanation – numerous internet pages, most of which appear to be social media posts, including links to companies providing market insights and analysis, legal alerts of criminal misconduct, company reports, U.S. and international articles and political commentary.

Claimant further identifies a purported investment company as the perpetrator of misconduct against Claimant and also alleges a “murder” that is linked to a business where Claimant was allegedly employed as a Non-Employee Director. Claimant’s tips were closed and do not on their face bear any relation to the charges in the Covered Actions.

I have a lot of questions about how someone could lose $20 trillion. Of course we’ll never know the details, but apparently, the Staff was skeptical:

On [Redacted], pursuant to Exchange Act Rule 21F-8(e), OWB provided notice to Claimant that it had determined that these seven award applications were frivolous or noncolorable. OWB also informed Claimant that the Commission has the authority to permanently bar a claimant. Accordingly, OWB recommended that Claimant withdraw all frivolous or noncolorable claims that he/she had submitted. The 30-day deadline to withdraw the claims expired on [Redacted], and Claimant did not respond.

The Commission issued a permanent bar because the claimant’s time-wasting, frivolous claims hindered the efficient operation of the whistleblower program. The ability to issue a bar was part of 2020 rule changes – and these FAQs give more color to whistleblowers about what will be considered “frivolous” or fraudulent. The order notes the claimant had filed “3 or more applications” – but it’s not clear exactly how many. The last time the Commission issued a permanent bar, the individuals had filed hundreds of frivolous applications.

– Liz Dunshee