Good Deed Performed Too Early for SOX Award

The US Court of Appeals for the Second District has held that the Securities and Exchange Commission (“SEC”) was within its rights to deny a whistleblower award to Larry Stryker under Section 21F of the Dodd-Frank Act (“Dodd-Frank”), 15 U.S.C. § 78u-6.

From 2004-2009, Mr. Stryker submitted information to the SEC regarding alleged wrongdoing by Advanced Technologies Group LTD.  After opening an investigation in early 2009, the SEC reached an approximately $19 million settlement with the respondents to the enforcement action. The whistleblower subsequently applied for an award, but it was denied by the SEC because the information was submitted before enactment of Dodd-Frank.  In agreeing with the SEC, the Second District noted “If the purpose of Dodd-Frank was to encourage whistleblower activity, already completed actions would arguably not qualify“.  Further, it relied on the second step of the two-step framework laid out in Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984), which “instructs us to defer to an agency’s interpretation of the statute it administers, so long as it is reasonable“, and found that the SEC interpretation, while arguably not the only option permissible, was not unreasonable.

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