Hong v. Securities and Exchange Commission, No. 21-529 (2d Cir. 2022)Annotate this Case
Petitioner worked at a subsidiary of the Royal Bank of Scotland Group PLC (“RBS” or “the Bank”) for six weeks in the fall of 2007 before resigning, prompted by what he believed to be unlawful practices engaged in by the Bank in connection with its portfolio of residential mortgage-backed securities (“RMBS”).
Petitioner later formally submitted information to the SEC about the Bank’s misconduct. The SEC itself took no action against the Bank but gave the information to the Department of Justice (“DOJ”) and the Federal Housing Finance Agency (“FHFA”), each of which had already begun RMBS-related investigations into the Bank.
Petitioner n applied to the SEC for an award under its whistleblower program (the “Program”), established in 2010 by Section 21F of the Securities Exchange Act. The SEC denied his claim. Petitioner petitioned for judicial review.
The Second Circuit denied the petition holding that it found no error in the SEC’s construction of Section 21F to require an action “brought by the Commission” to support a whistleblower award. The court further decided that, contrary to Petitioner’s arguments, investigative and information-sharing activities engaged in by the SEC are not “covered judicial or administrative action[s] brought by the Commission under the securities laws” or “actions” as to which the DOJ and FHFA settlements can be considered “related.” Thus, the court adopted the Commission’s determination that Petitioner was not entitled to an award under the Program because the Commission did not bring a covered action.