SEC’s Limit on Retroactivity of Dodd-Frank Whistleblower Bounty Awards Is Reasonable, Second Circuit Holds
The Second Circuit Court of Appeals recently deferred to the SEC’s determination that a tipster who provided information to the Commission before July 21, 2010, the effective date of the Dodd-Frank Act, is not eligible to receive a whistleblower bounty payment. Stryker v. SEC, Case No. 13-4404-ag (2d Cir. Mar. 11, 2015).
As we previously discussed in an earlier blog post, the petitioner in this case allegedly provided tips to the SEC between 2004 and 2009. His information ultimately led to a settlement of over $19 million in November 2010. The SEC denied the whistleblower’s request for a bounty award on the grounds that he provided the information prior to the Act’s effective date. The whistleblower petitioned the Second Circuit for review of the SEC’s determination.
Emphasizing that Congress explicitly provided that a whistleblower must provide “original information” in the form and manner required by the SEC’s rules and regulations, the Second Circuit held that the SEC’s rule that whistleblower awards are made as a result of information provided for the first time after July 21, 2010 is consistent with Dodd-Frank’s legislative intent. The court further held that even if the intent of the statute was unclear, the SEC’s interpretation of the Act “was reasonable and entitled to [Chevron] deference.”
The Second Circuit’s decision effectively serves to preserve the SEC’s resources earmarked for whistleblower awards by limiting payouts to only individuals who provide information after the Act’s effective date.