Nebraska District Court: Employee’s Disclosures To FINRA Make Her A Dodd-Frank Whistleblower

In a first-impression decision, the U.S. District Court for the District of Nebraska recently ruled that an employee who disclosed information about potential securities law violations to FINRA may qualify as a “whistleblower” under Dodd-Frank, even though the employee did not provide any information to the SEC. Bussing v. COR Clearing, LLC, No. 12-cv-00238, 2014 U.S. Dist. LEXIS 69461 (D. Neb. May 21, 2014).

Background

Plaintiff Julie Bussing was employed as an executive vice president for Legent Clearing, LLC (the Company). FINRA instituted formal proceedings against the Company, alleging that it failed to comply with the Bank Secrecy Act of 1970 and anti-money laundering and financial reporting responsibilities imposed by SEC and FINRA rules. While compiling documents and other information for FINRA’s review, Plaintiff provided a report to her superiors concluding that the Company engaged in unlawful activity. Plaintiff alleged that her supervisors urged her to stall and stop responding to FINRA’s document requests and that her employment was terminated when she allegedly refused and continued to aid FINRA in its investigation.

Plaintiff filed suit alleging she was fired in violation of the Dodd-Frank whistleblower protection provision. The Magistrate Judge ruled that Plaintiff did not qualify as a whistleblower under the Dodd-Frank Act because she only disclosed information to FINRA, not the SEC. Plaintiff objected to the Magistrate’s findings in the district court proceedings.

District Court’s Ruling

The District Court reversed the Magistrate Judge’s ruling. It acknowledged that the term “whistleblower” is defined in the Dodd-Frank anti-retaliation provision as an individual who “provides information… relating to a violation of the securities law to the Commission.” (emphasis added). However, it reasoned that Plaintiff’s case was unusual and required the court to disregard the statutory definition of “whistleblower” to effectuate the purpose of the whistleblower provision. In addition to determining that the Dodd-Frank whistleblower provision protects disclosures to a broad range of persons and entities other than the SEC, the court noted that FINRA rules constitute rules or regulations “subject to the jurisdiction of the SEC.” Thus, the court ultimately determined that Plaintiff qualified as a Dodd-Frank whistleblower because her disclosures to FINRA were required by a rule or regulation subject to the SEC’s jurisdiction.

Implications

This decision is the most recent in a wave of cases around the country addressing the definition of “whistleblower” under Dodd-Frank. As we recently discussed, the Southern District of New York and Middle District of Florida recently reached different conclusions about whether individuals are required to complain to the SEC to be protected under the statute. This battle is expected to continue, and we will keep our loyal readers on top of this issue—especially when the federal circuit courts of appeal tackle it once again. Stay tuned…

Topics:  Adverse Employment Action, Dodd-Frank, FINRA, Hiring & Firing, Retaliation, SEC, Securities, Whistleblowers

Published In: Civil Procedure Updates, Civil Rights Updates, Finance & Banking Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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