California Ranked No. 1!

The staff at the Securities and Exchange Commission recently released the 2012 Annual Report on the Dodd-Frank Whistleblower Program.  It turns out that California leads the other states in terms of the number of tips received.   According to the report, California accounted for 17.4% of all tips received.  The next highest ranking state, New York, generated only 9.8%.  Delaware and Nevada trailed far behind with .2 and 2.4% of tips received.  These data support the notion that complaints are generated from where the companies’ operations are located, not where the companies are incorporated. 

What Due Process Is Due?

When it comes to whistleblower awards, I find it interesting that more questions haven’t been devoted to the constitutional adequacy SEC’s procedures.  As I understand the process, the SEC posts a Notice of Covered Action when a judgment or order results in monetary sanctions exceeding $1 million.  This starts the clock for individuals to apply for an award.  They have 90 calendar days to apply by submitting a completed Form WB-APP  to the Office of the Whistleblower by midnight on the claim due date listed for that action.  The staff then evaluates all timely whistleblower award claims in accordance with the criteria set forth in the SEC’s rules.  The staff then sends to each applicant a Preliminary Determination that provides a preliminary assessment as to whether the claim should be allowed or denied and, if allowed, setting forth the proposed award percentage amount.  The applicant may then contest the preliminary assessment in writing and may request a meeting but the SEC’s rules provide that meetings may be declined in the staff’s discretion. The Office of the Whistleblower then notifies the SEC of each Proposed Final Determination.  Any Commissioner may request within 30 days that the Proposed Final Determination be reviewed by the Commission.  If no request is made, then the Proposed Final Determination becomes the Final Order of the Commission. In the event a Commissioner requests a review, the Commission reviews the record that the staff relied upon in making its determinations.  

While the rules establish an orderly process, the lack of any right to a pre-decision fair hearing raises the obvious question of whether applicants are receiving due process.  This concern is exacerbated by the fact that Congress provided only limited appellate rights in Section 922.  “The fundamental requisite of due process of law is the opportunity to be heard.” Grannis v. Ordean, 234 U. S. 385, 394 (1914).  See Goldberg v. Kelly, 397 U.S. 254 (1970).