Earlier this week, the SEC issued an interpretation of the whistleblower rules under Section 21F of the Securities and Exchange Act of 1934, making clear that whistleblowers who report exclusively within their companies—not just those who report to the SEC itself—enjoy full protection of the Dodd Frank anti-retaliation provision. Thus, internal whistleblowing protected under Sarbanes-Oxley is similarly protected under Dodd-Frank, according to the SEC.
This interpretation clarified a recent decision by the Fifth Circuit on this point. See Asadi v. G.E. Energy U.S., L.C.C., 720 F.3d 620, 630 (5th Cir. 2013). In Asadi, the Fifth Circuit held that a whistleblower must report wrongdoing to the SEC itself in order to invoke the Dodd-Frank whistleblower provision. The Second Circuit stands to consider a similar issue, in a case dealing with an employee who was fired after reporting irregularity internally before bringing the issue to the SEC. See Berman v. Neo@Ogilvy LLC, 14-4626 (2d Cir.). The SEC explicitly mentioned this judicial uncertainty in its rule interpretation, but declined to reach the same result: “Although we appreciate that if read in isolation Rule 21F-9(a) could be construed to require that an individual must report to the Commission before he or she will qualify as a whistleblower eligible for the employment retaliation provisions provided by Section 21F, that construction is not consistent with Rule 21F-2 and would undermine our overall goals in implementing the whistleblower program.”
Although it is ultimately the courts’ role to determine what Congress intended by the whistleblower provision of the Dodd Frank Act, the SEC’s interpretation is compelling authority to favor broad protection. Whistleblowers will certainly cite this persuasive guidance in the future to avail themselves of Dodd Frank protection.