No whistleblower price when SEC gives advice to other agencies: court


The seal of the U.S. Securities and Exchange Commission (SEC) is seen at its headquarters in Washington, DC, U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly

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  • Ex-RBS employee loses candidacy for multi-million dollar award
  • Mortgage-backed securities advice helped agencies win $10 billion settlement
  • But lack of SEC involvement means there’s no money for whistleblower, court hears

(Reuters) – A U.S. appeals court ruled on Thursday that a former chief executive of the Royal Bank of Scotland was not entitled to a multimillion-dollar whistleblower award for reporting alleged illegal conduct related to mortgage-backed securities, even though his advice helped federal agencies win massive settlements with the bank.

A unanimous three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled that Victor Hong was not eligible for an award under the 2010 federal Dodd-Frank Act because the Securities and Exchange Commission (SEC) of the United States had passed on the information it had provided in 2014 to the Department of Justice rather than bringing its own action against RBS.

Hong’s attorney, Richard Corenthal of Archer Byington Glennon & Levine, said the decision highlights a flaw in Dodd-Frank that Congress should fix.

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“Otherwise, the current program discourages meritorious whistleblowers, as happened to Victor Hong in the RBS cases, thereby undermining Congress’s intent to provide reliable financial incentives to uncover financial fraud,” he said. -he declares.

The SEC declined to comment.

RBS was not involved in the case.

In 2017 and 2018, the bank agreed to pay more than $10 billion to settle DOJ and Federal Housing Finance Agency investigations into its sales of residential mortgage-backed securities in the years leading up to the US financial crisis. 2008. The bank denied any wrongdoing.

Whistleblowers can receive millions of dollars from the SEC under a program created by Dodd-Frank. The law allows for awards of up to 30% of government recovery in “legal or administrative actions” or “related actions” brought by the SEC.

Hong had argued that those terms were meant to apply broadly to any action by the SEC, including referral of lawsuits to other agencies based on information provided by whistleblowers.

But the 2nd Circuit said that despite Hong’s contribution to DOJ and FHFA investigations, Dodd-Frank clearly limited whistleblower rewards to enforcement actions brought by the SEC itself.

Circuit Judge Barrington Parker wrote that it was not the court’s job to rewrite federal law to expand eligibility for whistleblower rewards, even though that might help entice workers to report issues to the SEC.

The court upheld the SEC’s 2021 denial of Hong’s grant application, which he had appealed directly to the 2nd Circuit.

The panel also included circuit judges Susan Carney and Beth Robinson.

The case is Hong v. US Securities and Exchange Commission, 2nd US Circuit Court of Appeals, No. 21-529.

For Hong: Paul Brown and Richard Corenthal of Archer Byington Glennon & Levine

For the SEC: Matthew Ferguson

(NOTE: This article has been updated to include a statement from Richard Corenthal.)

Read more:

Royal Bank of Scotland pays $4.9bn for misconduct amid crisis

RBS to pay $5.5 billion to resolve major US mortgage investigation

Soaring SEC whistleblower prices spark legal practice boom

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Daniel Wiessner

Thomson Reuters

Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy development. He can be contacted at


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