The “Why” of SEC Whistleblower Awards: Analyzing the Rationale for Denials and Award Amounts in the SEC Whistleblower Program in 2024
In just eight months in 2024, the SEC’s whistleblower award program has generated awards ranging from $200,000 to $37 million, and a whole slew of unique cases. Out of the forty-six (46) Final Orders for Whistleblower Award Determinations in 2024 to date (September 2nd), twenty-five (25) involved the denial of one or more claimants’ applications for an award under the SEC program outright. Additionally, at least three orders were a split decision, where some claimant(s) received an award, while other claimants on the same covered action were denied an award.[1] Consequently, in 2024 the SEC issued an award in approximately 46% of its final orders.
Reviewing the 46 Final Orders so far this year reveals some common themes:
First, by far the most common reason for the outright denial of a whistleblower award claim is that the information submitted by the whistleblower did not “lead to” or “significantly contribute” to a successful action. In twenty-four (24) of the twenty-eight (28) orders denying a claimant an award, one of the primary bases for the SEC’s denial was that the information provided by the whistleblower did not lead to or substantially contribute to the SEC’s recovery in the covered action at issue. In each of these cases, the SEC received declarations from enforcement staff and lawyers regarding how the investigations at issue came to be and resulted in the covered actions. In many of the denials there simply was no evidence that the information submitted by the claimants ever made it to enforcement personnel. The SEC explained repeatedly that “the standard for award eligibility is not what the staff would have or could have done hypothetically, but, rather, what impact the whistleblower’s information actually had on the investigation.”
In several denials, the whistleblowers actually spoke to investigators or enforcement personnel, or participated in a separate investigation by another region or office that was ultimately closed, but their claims were denied because the SEC personnel declarations state that the SEC did not “use” the information in the covered action. There must be evidence of causation between the original information submitted and the eventual covered action that is supported by SEC personnel’s declarations. Mere correlation of timing or reasonable inference is not sufficient.
Second, twelve (12) out of the forty-six (46) final orders involved multiple claimants for a single covered action. Generally, those whistleblower claimants who submitted their tips early, provided ongoing assistance to the SEC, and were specific in their reports faired better.
Joint claimants occurred in three (3) award cases. In each of these the SEC presumed that the joint claimants’ award would be split 50/50. But one interesting case involved a claimant who claimed he/she was a joint claimant with another successful claimant, and the SEC denied the award because they were not able to establish that he/she jointly submitted information. The SEC explained that “the touchstone for determining whether two individuals acted as joint whistleblowers turns on how the individuals presented themselves when providing the information to the Commission.” Only one of the two claimants provided the documents and attended the interview. If you are truly “joint whistleblowers,” that needs to be clearly laid out in the initial submissions of information to the Commission.
Third, a common basis for denial of an award was late submission of a whistleblower award application outside of the 90-day deadline. In six (6) cases denied claimants submitted their award applications anywhere from two weeks to eleven years after the submission deadline.
Finally, two orders awarded compliance employees an award for tips submitted more than 120 days after the employees internally reported (as required by SEC rules), including an award to an in-house attorney whose original information was not derived from attorney-client information.
Clayton Wire is a Partner at Ogborn Mihm
[1] The Commission has also showed that it is open to reconsidering prior determinations, with one case involving a reduction of a preliminary whistleblower award from 28% to 23% and another on remand from a circuit court finding eligibility for a whistleblower previously denied an award.
