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SEC Continues Efforts to Protect Internal Whistleblowers under Dodd-Frank

September 3, 2015

Author: Christine B. Hawes.

The SEC recently issued interpretative guidance addressing an issue vexing courts since the passage of Dodd-Frank: whether the statute covers those individuals who only report concerns internally and fail to report to the SEC. In the guidance, the SEC concedes that the statutory language is “ambiguous” but attempts to clarify its view of the scope of the Dodd-Frank protections. The SEC contends that the requirement to report concerns to the agency only applies to those seeking reward under the bounty provisions of the statute, but that the anti-retaliation provisions of Dodd-Frank apply to those who only blow the whistle internally.

As we have discussed previously, courts are divided on the issue. In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit rejected the arguments in the SEC’s amicus brief and instead found that the anti-retaliation provisions of Dodd-Frank do not cover internal whistleblowers. Asadi is the only Circuit Court decision to date directly addressing the issue, but many lower courts have sided with the SEC and found internal whistleblowers are covered by Dodd-Frank.

The SEC’s interpretative guidance adds another arrow to a plaintiff’s (and the SEC’s) quiver to support the claim that Dodd-Frank prohibits retaliation against internal whistleblowers. The SEC also recently took the unusual step of filing a motion for leave to file an amicus brief in a district court case – Wadler v. Bio-Rad Laboratories, Inc., No. 3:15-cv-2356 (N.D. Cal.) – to further emphasize its view of the matter. However, it is not clear how much weight, if any, courts will give to the SEC’s interpretation. We will continue to monitor developments on this issue, including any decision by the Second Circuit in Berman v. Neo@Ogilvy LLC, in which the SEC filed an amicus brief making the same arguments set forth in the interpretative rule.

Christine B. Hawes
Counsel – Washington, D.C.
Phone: +1.202.624.2968