D.C. Circuit: No SEC Whistleblower Award for Lawyer Who Reported on His Own Client

Lawyer who tipped SEC can’t claim whistleblower award, US appeals court rules

A corporate attorney who tipped off the U.S. Securities and Exchange Commission to possible fraud involving his company was properly denied eligibility to collect a whistleblower award, an appeals court said in a ruling unsealed on Friday.

The U.S. Court of Appeals for the D.C. Circuit said the attorney, who was not named, failed to meet SEC requirements for whistleblower information to be “original” and not derived from legal representation of a client. Advertisement · Scroll to continue

There is a limited exception to the requirements under which lawyers could claim an SEC award if their disclosure was made in accordance with state professional attorney conduct rules and in a client’s interest. The D.C. Circuit found the exception did not apply.

Asset managers and rating agencies brace for next round of SEC texting fines

Asset managers and rating agencies are preparing for possible fines and sanctions as the Securities and Exchange Commission expands its probe into employees texting about company business on personal devices and other unofficial channels.

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The years-long probe, which started with investment bankers, is not finished yet: BlackRock, Blackstone, Invesco and Moody’s all have disclosed that they were contacted in relation to the SEC’s texting investigation.

Some already have set aside tens of millions of dollars to cover expected penalties, according to a review of recent regulatory filings.

Enforcement Activity Involving Auditors – 2024 Mid-Year Update

In January 2024, we issued the report “2023 Enforcement Activity Involving Auditors,” in which we analyzed enforcement activity brought against auditors by the US Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) during 2018– 2023. Our analysis featured enforcement trends and a comparison of activity under the SEC’s and PCAOB’s current leadership to activity under the prior administrations. We also made five predictions about enforcement activity against auditors in 2024 and beyond.

In this mid-year update, we examine how each of our five predictions has fared in the first half of 2024 (H1 2024).

The Gap In SEC Individual FCPA Enforcement Actions Is Approaching 4 Years

For many years, SEC enforcement officials have talked about the importance of individual FCPA enforcement actions and set forth below are representative quotes from over the years.

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The last individual FCPA enforcement action by the SEC occurred on October 14, 2020.

Since October 2020 there have been 22 corporate SEC FCPA enforcement actions and none of them have involved related FCPA actions against individuals.

Not one.

NVIDIA

Additionally, a couple of years ago, I published Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation, which identified still more rules of thumb that judges have developed over time. For example, when addressing loss causation, courts often require revelation of the fact of falsity (rather than a revelation of problems traceable to the fraud), and will further hold that notice of an investigation, without more, categorically cannot cause a loss.

You see the problem. The question whether a complaint pleads falsity or a strong inference of scienter or loss causation or materiality is a holistic factual inquiry; but as these rules build up, pleading or litigating a securities case becomes about whether plaintiffs have complied with an increasingly arcane set of rules. I like to quote then-Chief Judge William Young from 1999, describing the PSLRA as a “Byzantine pleading code …for securities actions.” In re Number Nine Visual Tech. Corp., 51 F. Supp. 2d 1 (D. Mass. 1999).

Which is what I was thinking about when going over NVIDIA’s opening brief in NVIDIA Corporation v. E. Ohman J:or Fonder AB, currently pending before the Supreme Court.