On August 14, 2023, in a rare whistleblower award opinion, the Eleventh Circuit affirmed the Securities and Exchange Commission’s (SEC) denial of a whistleblower award in Granzoti v. Securities and Exchange Commission, 2023 WL 519503 (11th Cir.). The opinion establishes that eligibility for SEC whistleblower awards follows an actual causation standard – i.e., that the SEC must act upon the whistleblower’s tip.
Renato De Miranda Granzoti submitted a tip to the SEC’s whistleblower program concerning a pyramid scheme in 2013. The next year the SEC opened an investigation into the scheme and filed an enforcement action. The SEC subsequently secured a final judgment in its favor, and Granzoti filed his application for a whistleblower award. But the SEC denied him a bounty.
While Granzoti submitted his whistleblower tip before the SEC had even opened an inquiry into the fraud scheme, declarations from the SEC showed that his tip was never relayed to the staffers that investigated and brought the enforcement action. Instead, the SEC received a referral from the Department of Justice (DOJ) and opened its investigation based on the (apparently later) DOJ referral.
Under 17 C.F.R. § 240.21F-4(c) there are three primary ways a whistleblower becomes eligible for an award:
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