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 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.)
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.
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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.
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