Interpretation: A whistleblower under the Dodd-Frank Act (Act) does not have to report suspected violations to the US Securities and Exchange Commission (SEC) in order to qualify for the Act's anti-retaliation protections, according to a recently issued SEC interpretation. Rather, individuals will fall within those protections even if they only report suspected violations internally to their company.

The SEC issued its interpretation in response to the decision in Asadi v. GE Entergy USA LLC in which the US Court of Appeals for the Fifth Circuit dismissed the plaintiff's Dodd-Frank retaliation claim because he never reported his concerns about the company to the SEC. The SEC observed that, "[u]nder our interpretation, an individual who reports internally and suffers employment retaliation will be no less protected than an individual who comes immediately to the Commission."

Impact:  Some federal district courts have sided with the SEC on the issue of whether whistleblowers who only report suspected violations internally are protected from retaliation, but the SEC's guidance is directly contrary to the Fifth Circuit's interpretation of the Act. The Second Circuit Court of Appeals is poised to issue a decision on this issue in Berman v. Neo@Ogilvy LLC & WPP Group USA, Inc., possibly creating a split in the circuits. Given the unsettled law in this area, employers subject to the Act should consult with counsel before taking any adverse employment action against individuals who report suspected violations through the employer's internal channels.