SEC Rejects Late Filing of Whistleblower Claim.

If you have submitted a tip to the Securities and Exchange Commission, either as an individual or an attorney representing a client, it is crucial that you check the Notices of Covered Actions monthly. The Securities and Exchange Commission has denied another whistleblower claim because the individual did not submit it within the deadline. The denial order in Securities Exchange Act Release No. 72178 (May 16, 2014) is available at http://www.sec.gov/rules/other/2014/34-72178.pdf.

After a successful enforcement action that results in monetary sanctions exceeding $1 million, the SEC posts a Notice of Covered Action. The whistleblower has 90 calendar days from publication of the Notice of Covered Action to file Form WB-APP. 17 C.F.R. § 240.21F-10(b).

In requiring whistleblowers to stick to the deadline, they cited two reasons. The deadline ensures “fairness to all potential claimants by giving all an equal opportunity to have their competing claims evaluated at the same time, and to bring finality to the claims process so that we can make timely awards to meritorious whistleblowers.”

Rule 21F-8(a) allows the Commission to waive the deadline “upon a showing of extraordinary circumstances.” 17 C.F.R. § 240.21F-8(a). However, it declined to do so in this case. According to the explanation, the Commission will only allow a late filing when the reason for the late filing was beyond the claimant’s control and the applicant filed as soon as reasonably practicable. Attorney misconduct or serious illness were identified as two potential justifications for granting relief from the deadline.

The Commission showed little sympathy for the claimant’s excuses for late filing, which included a lack of awareness of the existence of the whistleblower program. The number of days the claim form was late and other information that might identify the whistleblower were redacted.

For late filing whistleblowers, the Commission did leave open the possibility in footnote 5 that they might use their general exemptive authority under Section 36(a) of the Exchange Act to set aside the deadline in a future case notwithstanding the lack of a showing of extraordinary circumstances. Section 36 allows the Commission to exempt persons from any rule. It must be in the public interest and consistent with the protection of investors. However, in footnote 2, the Commission indicated that an award was unlikely for this claim even if they set aside the deadline.

For additional information about this rule, please contact one of our SEC whistleblower attorneys.