I should not have been surprised to learn that the SEC can bar people from becoming whistleblowers.
In an unusual press release, the regulator, which in these cases, cannot name names, has “barred two individuals from the SEC’s whistleblower award program, each of whom filed hundreds of frivolous award applications.”
It appears that the regulator’s staff members overseeing the whistleblowing efforts had had enough.
“Over the years, these individuals submitted award applications to the SEC that bore no relation to the underlying enforcement action for which they were applying,” according to the prepared statement.
“The filing of these applications consumed considerable staff time and resources, hindered the efficient operation of the program, and did not contribute to any successful enforcement action. The individuals were repeatedly warned to stop submitting the abusive filings, but refused to do so,” according to the SEC.
One of the banned claimants “began submitting award applications to the Office of the Whistleblower (OWB) in November 2017, and since then submitted hundreds of applications,” according to the SEC.
Hundreds? How does this person have a job on Wall Street if he, she, or they is filling out whistleblower applications all day?
In addition, the claimant created a case based “on tips Claimant submitted involving Claimant’s personal mortgage foreclosure,” according to the SEC. Not sure who is to blame here or what the tips were. The only thing clear is the SEC’s actions: “Claimant’s tips were closed and do not on their face bear any relation to the charges in the Covered Actions.”
SEC officials note that on Jan. 25, 2021, “OWB provided notice to Claimant that it had determined that the award applications for the Covered Actions were frivolous. OWB also informed Claimant that the Commission has the authority to bar permanently a claimant. Accordingly, OWB recommended that Claimant withdraw all frivolous or noncolorable claims that he/she had submitted.”
Much to everyone’s surprise, I’m sure, the claimant “withdrew all of his/her pending claims.” Sadly, that moment was short-lived. “However, a few days later, Claimant submitted a letter to OWB stating that he/she had reconsidered and did not wish to withdraw any of his/her award applications.”
Things ultimately led to the regulator barring the person from applying for a whistleblower award.
“Frivolous award applications hamper our ability to efficiently process awards to meritorious whistleblowers who come forward with helpful information intended to assist law enforcement,” says Emily Pasquinelli, acting chief of the SEC’s Office of the Whistleblower, in a prepared statement. “Today’s permanent bars send an important message that frivolous award filers will not be tolerated.”
There is some good news on the whistleblower front.
The SEC last week unveiled “an award of approximately $36 million to a whistleblower whose information and assistance significantly contributed to the success of an SEC enforcement action as well as actions by another federal agency,” according to an official release.
“The whistleblower provided crucial information on an illegal scheme to the SEC’s and the other agency’s staffs, which included multiple meetings and the identification of key documents and witnesses,” according to the SEC. “Under the SEC’s whistleblower program, individuals who provide critical information to other agencies may be eligible for a related action award if they are also eligible for an award in the underlying SEC action.”
So, obviously, the system can work.
“The SEC has awarded approximately $1.1 billion to 214 individuals since issuing its first award in 2012,” according to the SEC. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. … Whistleblower awards can range from 10-30 percent of the money collected when the monetary sanctions exceed $1 million.”
I almost hesitate to share the following whistleblower link but here goes — in case you have a case: www.sec.gov/whistleblower