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Supreme Court Rules that Whistleblower Must Report to SEC

The United States Supreme Court has ruled that Dodd-Frank’s anti-retaliation provisions apply only to whistleblowers who report the misconduct to the SEC.  In the case, the employee brought a claim under Dodd-Frank’s whistleblower anti-retaliation provisions, even though he had not reported to the SEC, because he claimed that he was fired as a result of reporting to management suspected securities law violations.  The Supreme Court reversed the decision of the Ninth Circuit based on the plain reading of the statute which defines “whistleblower” as any individual who provides information relating to a violation of the securities laws to the SEC.   The Court rejected the SEC rule that expanded anti-retaliation protection to those who only report internally.  Looking at legislative history, the Court reasoned that “Dodd-Frank’s award program and anti-retaliation provision thus work synchronously to motivate individuals with knowledge of illegal activity” to report to the SEC.

OUR TAKE: We re-state our opinion that the Court is correct on the law even though Congress probably did want to protect those who only reported internally.  Regardless, companies should still avoid retaliating against internal whistleblowers because (i) good companies should want to ferret out wrongdoing by encouraging employees to come forward and (ii) other laws and rules (e.g. state employment laws, Sarbanes-Oxley) could serve as the basis for a lawsuit.