`
`NOT PRECEDENTIAL
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`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`_____________
`
`No. 22-1652
`_____________
`
`JAMIE DOE (Claimant #2),
` Petitioner
`
`v.
`
`SECURITIES AND EXCHANGE COMMISSION
`________________
`
`On Petition for Review of an Order of
`the Securities and Exchange Commission
`______________
`
`Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
`February 6, 2023
`______________
`
`Before: CHAGARES, Chief Judge, SCIRICA, and RENDELL, Circuit Judges
`
`(Opinion filed: March 23, 2023)
`____________
`
`OPINION*
`____________
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`
`
`
`*
`This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does
`not constitute binding precedent.
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`

`

`CHAGARES, Chief Judge.
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`The United States Securities and Exchange Commission (the “SEC”) reached a
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`settlement agreement in 2015 with Focus Media (the “Company”) and its Chief
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`Executive Officer after an SEC investigation uncovered improper conduct related to
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`certain Company transactions. “John Doe” subsequently filed an application with the
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`SEC for a whistleblower award based on Doe’s alleged contributions to the SEC
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`investigation. The SEC denied the application. Doe now petitions us to set aside the
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`SEC’s denial of his award application. For the following reasons, we will deny his
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`petition as well as his attendant motion to expand the record.
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`I.
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`We write solely for the parties and so recite only the facts necessary to our
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`disposition. On September 30, 2015, the SEC filed a settled cease-and-desist proceeding
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`against the Company and its CEO for negligently failing to disclose its partial sale of a
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`subsidiary to insiders at favorable pricing ahead of the Company’s sale of that same
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`subsidiary to a third party at a much higher price. The Company and CEO agreed to pay
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`more than $55 million in penalties, disgorgement, and interest as part of the settlement.
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`
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`Following that settlement, Doe timely submitted a whistleblower award
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`application claiming to be a principal author of a November 2011 report (the “Report”)
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`that examined the Company and CEO, claiming that information therein “became the
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`cornerstone of the [SEC’s] case” against the Company and its CEO. Appendix (“App.”)
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`121-22. The Report was published by Muddy Waters Research and contained detailed
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`information concerning the activities of the Company and its CEO, including the sale of
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`2
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`the subsidiary implicated in the SEC’s enforcement action. In his application, under the
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`relevant section regarding the method of his tip submission to the SEC, Doe checked the
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`“Other” box, writing in “News Media” as the manner via which his tip was submitted to
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`the agency.
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`The SEC’s Claims Review Staff (“CRS”) issued a preliminary determination that
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`recommended denying Doe’s award claim. A sworn declaration by an SEC investigator
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`acknowledged the Report played a role in her investigation into the Company. The CRS
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`concluded, however, that “[e]nforcement staff obtained the online [Report] through its
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`own initiative from a public website[,]” as opposed to from Doe directly and, as a result,
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`he did not qualify as a whistleblower. App. 128 n.5. Doe requested that the CRS
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`reconsider its determination, but upon reconsideration, CRS reaffirmed its initial
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`recommendation that his claim be denied. Doe timely contested the CRS
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`recommendation, arguing that the Report was provided directly to the SEC via email
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`push notifications, social media postings, and news coverage.
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`The SEC’s final order adopted the CRS recommendation to deny Doe’s award
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`claim. It noted the role of the Report in the SEC’s investigation and eventual successful
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`settlement and credited Doe as an author of the Report. But it ultimately concluded that
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`Doe had failed to submit the Report in accordance with the relevant whistleblower
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`procedures and, moreover, that he had failed to provide information directly to the SEC at
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`all. He was thus not a “whistleblower” under the relevant regulations. Regarding the
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`emails, social media postings, and news coverage that Doe specifically had pointed to
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`following the initial CRS recommendation, the final order explained that “[Doe] does not
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`3
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`assert that [Doe] was the author or sender of these emails and postings and thus [Doe] has
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`failed to show that [Doe] provided . . . information directly to the [SEC].” App. 11
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`(quotation marks omitted). Finally, the SEC considered whether to exercise discretionary
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`authority to waive these procedural requirements and grant the award to Doe but
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`concluded that such a waiver was unwarranted on the facts of his submission.
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`The SEC, however, granted whistleblower status to a different claimant
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`(“Claimant 1”) who also helped create the Report. It granted Claimant 1’s application
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`despite CRS’s preliminary recommendation that it be denied alongside Doe’s. In so
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`doing, the SEC awarded Claimant 1 $14 million based on a percentage of the settlement
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`achieved with the Company and its CEO. Claimant 1’s whistleblower application faced
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`many of the same procedural roadblocks as Doe’s, with the primary substantive
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`difference being the fact that Claimant 1 purportedly emailed the Report directly to an
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`SEC enforcement attorney a few days after the report was published online. This email
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`was the key justification for the SEC’s granting of the award to Claimant 1 and not to
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`Doe; it led the SEC to conclude that “it would be in the public interest” to waive the
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`procedural requirements for Claimant 1 and grant him the award “in light of the unusual
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`facts and circumstances here.” App. 13. However, the final order also stated that
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`Claimant 1’s email to the SEC attorney played no role in instigating the investigation into
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`the Company and CEO, since SEC investigators found the Report on their own.
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`Doe filed a petition for review of the SEC’s final order. The SEC filed the
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`administrative record. Doe submitted a filing suggesting the administrative record was
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`incomplete, to which the SEC responded by claiming that the complete record had in fact
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`4
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`been filed. Doe, simultaneously with the filing of the opening brief, separately moved
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`that the record be augmented to include, among other things, a declaration from
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`petitioner, news articles, and emails between counsel. The SEC opposed the motion.
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`Separately, Doe’s merits brief also urges that the administrative record should be
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`augmented to include more documents relating to the SEC’s award determination
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`regarding Claimant 1, particularly the email from Claimant 1 providing the Report
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`directly to the SEC enforcement attorney.
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`II.1
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`A.
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`The SEC “shall pay an award or awards to 1 or more whistleblowers who
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`voluntarily provided original information to the Commission that led to the successful
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`enforcement of [a] covered judicial or administrative action.” 15 U.S.C. § 78u-6(b)(1).
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`To be eligible for an award, a whistleblower must submit information in accordance with
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`the SEC’s rules and regulations. Id. § 78u-6(a)(6), (c)(2)(D). Rule 21F-9 governs the
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`procedures for submitting information as the basis of a claim for a whistleblower award.
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`17 C.F.R. § 240.21F-9; see also id. § 240.21F-2(b) (providing that eligibility for awards
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`is conditioned in part on compliance with these procedures). It provides, in relevant part,
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`that to be considered a whistleblower for these purposes, an individual must submit her or
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`1 This Court has jurisdiction over this petition for review of the SEC’s award denial under
`15 U.S.C. § 78u-6(f). Per § 78u-6(f), we review the SEC’s decisions concerning
`eligibility for a whistleblower award “in accordance with section 706” of the
`Administrative Procedure Act, which requires us to set aside an agency action if it is
`“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5
`U.S.C. § 706(2)(A).
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`5
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`his information to the SEC in a “Form TCR” (Tip, Complaint or Referral) mailed or
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`faxed to the SEC or submitted via its online portal. Id. § 240.21F-9(a). Setting aside the
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`Form TCR requirement specifically, the SEC has interpreted its rules to generally
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`“require[] that information be ‘provided’ and ‘submitted’ directly to the Commission . . . .
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`[The rules] make[] no allowance for the online publication of information that, by
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`happenstance, indirectly makes its way into the hands of Commission staff.” See
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`Exchange Act Rel. No. 82,955, 2018 WL 1516953, at *3 (Mar. 27, 2018). The Supreme
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`Court has, in a related context, similarly analyzed the meaning of “whistleblower” to
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`include a direct reporting requirement. Digit. Realty Tr., Inc. v. Somers, 138 S. Ct. 767,
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`777 (2018).
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`Doe has failed to show that the SEC acted arbitrarily or capriciously in concluding
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`that his award application failed to meet the foregoing whistleblower criteria. First, it is
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`undisputed that Doe did not submit the Report to the SEC via a Form TCR. Indeed,
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`Doe’s initial submission indicated only that the SEC learned of the Report via “News
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`Media.” App. 121. This alone counsels in favor of denying Doe’s petition, since the
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`relevant regulations explicitly contemplate the denial of an application if the applicant did
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`not follow the requisite submission procedures. Doe focuses, instead, on the other ways
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`he allegedly provided the Report to SEC officials, such as the email blast and social
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`media posts containing the Report that purportedly made their way to SEC investigators.
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`But the SEC appropriately concluded that Doe did not claim to have authored those
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`emails and posts, since his presentation to the SEC and the examples he submitted
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`alongside it contain no identifying information suggesting he sent those
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`6
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`communications.2 While Doe claims that the necessary implication of his presentation
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`was that he authored those emails and tweets, his conclusory assertions do not undermine
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`the SEC’s inference to the contrary given the lack of evidence of authorship in the record.
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`Doe is thus left to argue that the SEC should have waived its procedural
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`requirements for him, an unsuccessful argument he makes only obliquely. There are two
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`relevant waiver provisions. First, “the [SEC] may, in its sole discretion, waive any of
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`[the whistleblower award] procedures based upon a showing of extraordinary
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`circumstances.” 17 C.F.R. § 240.21F4-8(a). Second, “the [SEC] . . . may . . . exempt any
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`person . . . from any provision or provisions of this title or of any rule or regulation
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`thereunder, to the extent that such exemption is necessary or appropriate in the public
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`interest.” 15 U.S.C. § 80a-6(c). The SEC concluded here that extraordinary
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`2 On appeal, Doe attempts to include in the record a sworn declaration containing new
`factual allegations regarding his purported authorship of these emails. However, we will
`not consider this belated declaration because it was created after the SEC issued its final
`order and thus played no role in the SEC’s decision. See SEC v. Chenery Corp., 318
`U.S. 80, 87 (1943) (“The grounds upon which an administrative order must be judged are
`those upon which the record discloses that its action was based.”). While there are
`certain exceptions to that principle, including “when the action is adjudicatory in nature
`and the agency factfinding procedures are inadequate,” NVE, Inc. v. Dep’t of Health &
`Hum. Servs., 436 F.3d 182, 189 (3d Cir. 2006), this is not such a case. Doe had multiple
`opportunities to state his case, and to explain his role in submitting information to the
`SEC specifically, prior to the agency’s issuing its final order. Doe’s motion to expand
`the record will therefore be denied.
`
`Similar logic underpins our rejection of Doe’s request in his brief that the SEC be
`required to augment the administrative record with materials pertaining to Claimant 1’s
`application. While the agency’s final order does reference Claimant 1’s email to the SEC
`enforcement attorney to justify its divergent award conclusions, nothing in the record
`suggests that the SEC relied on that email or any other Claimant 1 materials to evaluate
`Doe’s application on its own merits. See Chenery, 318 U.S. at 87.
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`7
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`circumstances warranting waiver did not exist because Doe had not explained why he
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`could not have submitted the Report directly to the SEC. Additionally, while the SEC
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`“[did] not wish to diminish [Doe’s] role in investigating the Company,” it concluded that
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`the public interest would not be served by waiver since Doe had not submitted
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`information to the agency directly and thus had not engaged in the sort of activity that
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`whistleblower awards were designed to encourage. App. 13.
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`Doe, for his part, does not respond to or address the foregoing rationale. Instead,
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`he focuses on the alleged incoherence of the SEC’s simultaneous decision to grant a
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`waiver for Claimant 1. But Claimant 1’s award has no substantive bearing on the SEC’s
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`decision as to Doe. None of Doe’s complaints about the disparate outcome resolve or
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`eliminate the clear procedural deficiencies in his application, nor do they affirmatively
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`explain why the SEC should have exercised its discretion to waive the procedural
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`requirements in Doe’s case. In staking his claim so heavily on the notion that he is
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`entitled to an award because Claimant 1 received one, Doe fails to explain why he is
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`entitled to it on the merits of his own case. Indeed, even if we were to credit Doe’s
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`assertion that he was similarly situated to Claimant 1 in all material respects, that would
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`only suggest that the agency arguably should have denied Claimant 1 the award on the
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`same grounds as it denied Doe’s (which, in fact, is the very outcome that the CRS
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`initially recommended in its preliminary report).3 Doe’s focus on Claimant 1 is thus
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`3 We acknowledge that the SEC’s proffered justification for awarding Claimant 1 $14
`million and Doe nothing – hinging primarily on a single email that Claimant 1 sent to an
`SEC enforcement attorney – leaves something to be desired. The SEC has elsewhere
`argued that awards should only be granted where the tip itself “significantly contribute[d]
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`8
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`unavailing because it does not undermine the SEC’s denial of his application on
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`procedural grounds or its attendant decision not to grant a waiver of those procedures.
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`Considering the SEC’s reasoned reliance on Doe’s failure to follow the requisite
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`whistleblower procedures – particularly the requirement that a whistleblower directly
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`submit information to the SEC – alongside its thoroughly explained (and virtually
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`unchallenged) refusal to exercise its discretion to grant a procedural waiver, the SEC did
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`not act arbitrarily or capriciously in denying Doe’s whistleblower award application.
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`III.
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`For the foregoing reasons, we will deny Doe’s petition for review of the SEC’s
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`whistleblower award determination as well as his motion to expand the record.
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`to the success of the [SEC] action.” Kilgour v. SEC, 942 F.3d 113, 123 (2d Cir. 2019).
`Yet Claimant 1’s email had no ostensible impact on the investigation; SEC investigators
`found the Report on their own. The Court of Appeals for the Second Circuit opinion in
`Kilgour similarly casts some doubt on the SEC’s invocation of 17 C.F.R § 240.21F-
`4(b)(5)’s “original source” exception as justifying Claimant 1’s award here. See 942
`F.3d at 125 (construing the “original source” exception to be inapplicable where the SEC
`had already obtained applicants’ information from a different source, even though the
`applicants were the originators of that information). But these potential issues are beyond
`the scope of this appeal and, moreover, serve only to call Claimant 1’s award into
`question while doing nothing to undermine the SEC’s reasoning as to Doe.
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`9
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`