UPDATE: In Digital Realty Trust, Inc. v. Somers, the Supreme Court clarified the scope of the whistleblower protection provision of the Dodd-Frank Act. Click here to learn more about anti-retaliation protections for SEC whistleblowers under the Dodd-Frank Act and Sarbanes-Oxley Act.
In an article titled “SEC Defends Internal Whistleblower Protections At 2nd Circ.,” Law360 quotes whistleblower lawyer Jason Zuckerman about the whistleblower protection provision of the Dodd-Frank Act. The article reports about an amicus brief that the SEC filed in Liu Meng-Ling v. Siemens AG arguing that the anti-retaliation provision of the Dodd-Frank Act protects whistleblowers who disclose securities law violations internally. The article states:
The commission’s brief was lauded by whistleblower attorneys, who praised the SEC for getting vocal in its anti-retaliation efforts.
“Kudos to the SEC for taking a stand on this critical issue,” Jason Zuckerman of Zuckerman Law said in an email. “Congress obviously intended to protect internal whistleblowing under the anti-retaliation provision of the Dodd-Frank Act.”
Zuckerman said it was ironic that the business community was trying to cut out employees who report internally from whistleblower protections, saying large corporations had “killed several forests” submitting comments on the proposed protections, in which they argued that there shouldn’t be any obstacles for whistleblowers to make internal disclosures in light of their robust compliance programs.
Last summer, the Fifth Circuit held in Asadi v. G.E. Energy that Dodd-Frank Act protected conduct is limited to disclosures to the SEC. Most of the district courts addressing this issue however, have held that internal disclosures are protected under Dodd-Frank’s whistleblower protection provision, including two post-Asadi decisions. See Ellington v. Giacoumakis, No. 13-11791-RGS, 2013 WL 5631046 (D. Mass. Oct. 16, 2013) and Rosenblum v. Thomson Reuters, No. 13-cv-02219, 2013 WL 5780775 (S.D.N.Y. Oct. 25, 2013).
My comment to Law360 focuses on the incongruity of the business community’s vigorous attempts to narrow Dodd-Frank Act protected conduct. When the SEC issued proposed rules implementing the whistleblower reward provision of Dodd-Frank, many corporate law firms and large companies submitted comments extolling their internal compliance programs and whistleblower protection policies, and demanding that the SEC require whistleblowers to make disclosures internally to be eligible for a whistleblower reward. If companies are so confident that whistleblowers will not suffer retaliation for disclosing securities law violations internally, than why do they need to urge courts to rewrite Section 922 to eliminate one of the forms of protected whistleblowing?
The facts in one of the post-Asadi decisions protecting internal disclosures underscores the importance of providing broad and robust whistleblower protection. When Ellington, a financial planner, disclosed to a compliance officer that his employer was distributing misleading investment reports to existing and prospective clients, the principal of the investment adviser confronted Ellington and accused him of being the whistleblower who prompted the compliance officer’s investigation. And he terminated Ellington’s employment the following day. Ellington’s disclosures led to the SEC assessing $200,000 in civil penalties. Ellington is but one of many examples of egregious whistleblower retaliation casting doubt on self-regulation and confirming that the SEC was right to reject the business community’s demand that it require Dodd-Frank Act whistleblowers to make internal disclosures prior to reporting securities law violations to the SEC.
What Damages Can a Dodd-Frank Whistleblower Recover?
Qualifying for a Dodd-Frank SEC Whistleblower Award
What is the Process for Seeking a SEC Whistleblower Bounty?
SEC Whistleblower Lawyers
SOX Whistleblower Protections for SEC Whistleblowers