A Whistleblower’s Legal Journey, Part V: A Behind-the-Scenes Look into Being an SEC Whistleblower

On Behalf of | June 28, 2024 | Whistleblower Law

By Shaun Rosenthal and Danya Rangachar

In movies, whistleblowers are often depicted in dark, suspenseful settings, with protagonists on the run. However, the experience of most whistleblowers is far less dramatic. While there are certainly challenges and risks involved, a whistleblower’s legal journey is typically more nuanced, and less sensationalized than what Hollywood portrays.

In this blog post, we will explore the step-by-step process of filing a Securities and Exchange Commission (SEC) whistleblower claim, from the initial filing to the enforcement action, and ultimately, the application for and potential receipt of a whistleblower award.

 An Inside Look into Being an SEC Whistleblower

Step 1 – Filing the TCR Form

A whistleblower’s journey begins with the submission of a Form Tips, Complaints, or Referrals (TCR) to the SEC.[1] The TCR form is self-explanatory. When our firm submits TCRs, we typically detail the fraudulent scheme in a concise and robust letter to the SEC, along with any exhibits, and add these as attachments to the submission.

Step 2 – The Government’s Investigation

After the TCR is filed, the SEC begins its investigation. The investigation might look different for each case. For example, there have been instances where the SEC immediately reached out to us to request an interview with the whistleblower. Sometimes, it takes longer.

In the interview, the SEC may ask detailed questions about the whistleblower’s knowledge of the scheme, request copies of supporting documents in the whistleblower’s possession, a witness list, or an organizational chart. Typically, attorneys will follow up with the government on behalf of the whistleblower with supplemental submissions to further expand on the claims.

The SEC may continue to investigate the company and alleged fraudulent conduct. There are many investigative resources at the government’s disposal (e.g. document requests, interviewing witnesses, receiving formal testimony, or reviewing publicly available records).

Step 3 – The SEC’s Decision to Enforce the Conduct

The SEC may decide to bring a case in federal court for civil penalties. If the Commission is successful (through settlement or an order), and the recovery amounts to more than $1 million, the Commission will post a Notice of Covered Action (NoCA) on their website.[2]

Step 4 – Filing an Award Claim and Awaiting Preliminary Determination

Attorneys regularly review the NoCA publications, which are typically updated each month, to determine when to file an award claim. A whistleblower must file a claim for an award within 90 days of the NoCA.[3]

The award claim should consist of a very detailed explanation of how the whistleblower’s original information and assistance led to the SEC’s investigation and enforcement. The SEC’s decision of whether to issue an award, let alone a figure between 10-30%, depends, in part, on the claim for award.

Once the award claim is filed, the SEC deliberates. This review process takes time.[4] The SEC will issue a preliminary determination, which the whistleblower can either accept or contest. Challenges have worked, but the success rate is low. The process ends with the SEC issuing a final award order after any challenges have been resolved.[5]

Lessons and Takeaways for Potential Whistleblowers

As you can probably tell, the journey from filing the initial claim to a payout can take years. The SEC’s Office of the Whistleblower is currently reviewing recommendations to improve the efficiency of their award process and Congress has been involved in ensuring whistleblower awards are paid in a reasonable time.[6]

Keep in mind that in deciding the award, the SEC considers the “degree of assistance provided by the whistleblower and any legal representative of the whistleblower[.]”[7] Therefore, while the initial submission is crucial, the ongoing assistance by the whistleblower throughout the investigation is equally important.

Experienced whistleblower attorneys have built strong relationships with the SEC, earning the Commission’s trust to provide accurate and complete information. The more that the SEC relies on the whistleblower and their attorneys, the higher the likelihood of receiving a larger award.

If you believe you have a whistleblower claim, please feel free to fill out our online intake form to contact a whistleblower attorney at our firm today.

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 Part V is the end of the first installment of “A Whistleblower’ s Legal Journey.” We plan to draft another series later this year. If you have any questions or suggestions on topics, please write to [email protected] or [email protected].

[1]  17 C.F.R. § 240.21F-9(a)(2).
[2] Id. § 240.21F-10(a).
[3] Id.
[4] See, e.g., Rachel Ensign & Jean Eaglesham, SEC Backlog Delays Whistleblower Awards, Wall St. J. (May 4, 2015), https://www.wsj.com/articles/sec-backlog-delays-whistleblower-awards-1430693284.
[5]  Pursuant to 17 C.F.R. § 240.21F-13(a), a whistleblower can only appeal the SEC’s Final Order to a court of appeals if the SEC declines to issue an award.
[6] See, e.g., SEC Office of Inspector General, No. 575, SEC’s Whistleblower Program: Additional Actions Are Needed To Better Prepare for Future Program Growth, Increase Efficiencies, and Enhance Program Management, at i (2022); Letter from Senator Charles Grassley to SEC Chairman Gary Gensler (April 4, 2024), at 1.
[7] 17 C.F.R. § 240.21F-6(a)(2).