On August 4, 2015, the SEC released a rule interpretation supporting its view that whistleblowers who report possible wrongdoing internally within their company and not to the SEC, qualify for anti-retaliation protection under the Dodd-Frank Act. The Dodd-Frank Act protects employers from discharging, demoting, suspending, threatening, harassing, or discriminating against a whistleblower who engages in certain protected activity. 15 U.S.C. § 78u-6(h)(1)(A). One of the enumerated protected activities is a catchall provision that protects individuals who make disclosures that are required or protected under certain laws, which covers reporting possible wrongdoing internally. Inconsistently, however, the Dodd-Frank Act defines “whistleblower” as any individual who provides information relating to a violation of the securities laws to the SEC. Id. § 78u-6(a)(6).

The SEC’s rule interpretation establishes that, in its view, for purposes of qualifying for anti-retaliation protection, an individual’s status as a whistleblower does not depend on whether the individual reported the information to the SEC. The SEC based its decision on the fact that the broad reporting catchall provision is within the employment retaliation section and that its interpretation supports the SEC’s overall goals in implementing the whistleblower program by encouraging individuals to report possible wrongdoing.

The SEC’s interpretation is directly at odds with the Fifth Circuit’s decision in Asadi v. G.E. Energy (USA), L.L.C., in which the court held that the plain language of the statute creates a cause of action only for whistleblowers who report information to the SEC. 720 F.3d 620, 623 (5th Cir. 2013). As the Fifth Circuit noted, extending anti-retaliation protection to internal whistleblowers renders the Sarbanes-Oxley anti-retaliation provisions moot because individuals will always choose to raise claims under Dodd-Frank because of its greater monetary damages, longer statute of limitations, and ease of bringing whistleblower protection claims. However, the SEC’s rule interpretation is not likely to be the end of the debate. A case similar to Asadi is pending in the Second Circuit, Berman v. Neo@Ogilvy LLC, and it may only be a matter of time before the Supreme Court weighs in on the issue.

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