Can SEC Whistleblower Tips Be Submitted During The Shutdown?

The U.S. government began its shutdown on December 22, 2018. 
As of today, the shutdown has gone on for 13 days.  It is now
the fourth longest shutdown in U.S. history, and still going. 
(CNN has a chart listing all federal government shutdowns
since 1976
here.)  If you are an
SEC whistleblower or an
SEC whistleblower lawyer, you might be wondering whether the U.S. Securities and
Exchange Commission is still accepting
SEC whistleblower tips
during the shutdown.

[Edit: The December 2018 – January 2019 shutdown ended up
lasting for 35 days, becoming the longest shutdown of the
federal government in U.S. history.]

The SEC Shutdown

With certain exceptions, when the U.S. government shuts down,
most federal agencies do not receive new funding until the
shutdown ends.  This is sometimes referred to as a “lapse in
appropriations”.

When there is a lapse in appropriations, the Antideficiency
Act (31 U.S.C. §1341, et seq.) requires federal agencies to
curtail their operations until the government shutdown ends.

The SEC’s Operations Plan

The SEC is not an exception, and it has already gone into
shutdown mode.  In anticipation of a shutdown, in December
2018 the SEC put out an “Operations Plan Under A Lapse in
Appropriations” (the “Plan”), which can be found on the SEC’s
website
here.

Technically, The Commission Is Still Accepting SEC
Whistleblower Tips

Among other things, the Plan calls for non-essential
(“non-excepted”) SEC employees to be temporarily furloughed;
for employees on preapproved travel to return home; and for
the cancellation of employees’ paid leave until the shutdown
ends.  (Plan, page 3.)

The Plan estimates that the SEC has 4,436 employees.  Only
approximately 286 of those employees are working during the
current government shutdown.  (See the Plan, page 4.)

In the law enforcement context, the Plan explains that:

A limited number of staff will be on duty to handle emergency
enforcement matters, including temporary restraining orders
and/or investigative steps necessary to protect public and
private property;
monitor the Commissions “tips, complaints, and referrals”
system and web-based investor complaint system and process
referrals from self-regulatory organizations and others to
identify matters that are emergencies and take follow-up steps
relating to such emergencies; ongoing litigation that cannot
be deferred where there is a threat to property…  (Plan, page
15) (underline added.)

Based on the underlined language, the Commission is technically
still accepting SEC whistleblower tips during the shutdown.

Is The Staff Doing Anything With Those SEC Whistleblower Tips
During The Shutdown?

First off, the Plan has a section that could be read to imply
that the activities of the Office of the Whistleblower will be
operating with reduced staffing:

Tips, Complaints and Referrals

The Division of Enforcement will have only a
limited number of staff on duty to perform
critical functions. However, staff will
attempt to respond to certain critical matters,
including allegations of ongoing fraud and misconduct.  The
Tips, Complaints, and Referrals website will continue to be
operational and submissions will be reviewed for appropriate
action.  (Plan, pages 13-14) (underlines added.)

The SEC’s Office of the Whistleblower has posted a notice on its
website that might clarify this a bit:

Due to a lapse in appropriations, the U.S. Securities and
Exchange Commission is currently closed.  During the closure,
time sensitive or critical tips, complaints, or
referrals should be submitted via the electronic portal only. 
Tips, complaints, and referrals submitted via mail and fax
will be reviewed when the office reopens.  Thank you. 
(Underline added.)

Notice on the OWB’s website (Jan. 3, 2019)

In addition, the Plan summarizes major functions that are
being discontinued during the SEC shutdown “including
commencing investigations”.  (Plan, page 17.)

By way of background, SEC whistleblower tips must be filed on
the SEC’s Form TCR.  Those Forms TCR are reviewed by the SEC’s
Office of Market Intelligence and are then either marked “NFA”
(no further action) or are forwarded to other Staff in the
Division of Enforcement for further review.  Those other
Enforcement Division employees then make their own decision as
to whether to mark the tip as NFA or to begin an
investigation.  These are the first steps in “commencing
investigations” based on SEC whistleblower tips.

Taking the quoted sections above in context, while the SEC is
presently accepting SEC whistleblower tips, it appears as
though the Division of Enforcement will not be “commencing
investigations” based on those tips until the government
shutdown ends, unless those tips pertain to something “time
sensitive or critical”.

So, Should I File My Form TCR Now Or Wait Until The Shutdown
Is Over?

If you had been thinking about filing a tip with the SEC
before the shutdown began, you may be in a quandary as to
whether to submit it now or hold on to it until the government
shutdown is over.  I cannot advise you on what to do in this
article, but there are some things that you might want to
consider.

On the one hand, if you submit your SEC whistleblower tip now
through the SEC’s online portal, it may be reviewed and
perhaps even passed along to someone in the Enforcement
Division for investigation.  But if that Enforcement lawyer is
on furlough, or if the conduct that you are reporting is not
“time sensitive or critical”, your SEC whistleblower tip may
sit on their desk (or on their computer) until they get back
to work.  If new tips and other paperwork come in between now
and the end of the shutdown, it may take that employee longer
to dig through those things and get to your submission.

On the other hand, the Commission has stated that it is still
accepting SEC whistleblower tips on Forms TCR through its
online portal.  It has also stated that it is doing at least
initial reviews of SEC whistleblower tips that come in during
the shutdown.

You might also want to keep in mind that if an
SEC whistleblower award were to become available in your case later on, one factor
that could cause the Commission to reduce the amount of your
award is whether you “unreasonably” delayed in reporting your
tip to the SEC.  The Commission might determine a delay due to
the government shutdown to be “reasonable”.  Or it might view
it as “unreasonable”, because the SEC’s online TCR portal is
operational, and the limited staff is still doing at least
initial reviews of SEC whistleblower tips that come in during
the shutdown.

Ultimately, the decision about whether to file your SEC
whistleblower tip now or wait until the government shutdown
ends is one that you will have to make, either on your own or
in consultation with your own
SEC whistleblower attorney.

* * *

About the Pickholz Law Offices LLC

The Pickholz Law Offices LLC is a law firm that focuses on
representing clients involved with investigations conducted by
the U.S. Securities and Exchange Commission, FINRA, and other
securities regulators.

The Pickholz Law Offices has represented employees, officers,
and others in SEC whistleblower cases involving financial
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clients in securities enforcement investigations conducted by
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Attorney’s Offices, State authorities, and more. Examples of
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How to Contact the Pickholz Law Offices LLC

If you would like to speak with a securities lawyer or SEC
whistleblower attorney, please feel free to call Jason R.
Pickholz at 347-746-1222.

The Pickholz Law Offices remains open and will be fully
operational through teleworking while we all grapple with this
terrible pandemic. We hope that all of our clients,
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