SEC Explains Denial Of Late Whistle-Blower Filing

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By Yin Wilczek

July 28 — The Securities and Exchange Commission July 23 declined to excuse a whistle-blower's untimely application for a reward, finding that ignorance of its program is not an “extraordinary circumstance” that excuses a latefiling.

The SEC also stressed that claimants bear the “ultimate responsibility” to learn about its bounty program and to take steps to claim their awards.

According to the SEC's website, the July 23 order marks the third time this year that the commission has rejected a whistle-blower's “extraordinary circumstances” showing.

Under the SEC's whistle-blower rules, claims must be filed within 90 days from the date the notice of a covered action is issued. The SEC may waive the 90-day deadline based upon a “showing of extraordinary circumstances.”

In the July 23 order, the commission explained that it is not enough for a whistle-blower to show that the filing was caused by circumstances beyond his or her control.

Moreover, the SEC spelled out the circumstances under which attorney misconduct would constitute an “extraordinary circumstance.”

The “requisite level of attorney misconduct causing the untimely submission must be severe, involving blatant client deception, outright abandonment, or similar egregious misconduct,” the SEC said. “[O]rdinary negligence, such as Claimant's attorney here may be responsible for will not suffice.”

The order is available at 2014/34-72659.pdf.

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