Whistleblower Must Provide Information to the SEC to State a Retaliation Claim Under Dodd-Frank


A New York federal district court recently ruled that, with limited statutorily defined exceptions, a whistleblower asserting private relation claims under the Dodd-Frank Wall Street Reform and Consumer Protection Act must allege that the information he provided was reported to the Securities and Exchange Commission. The court held, however, that the Dodd-Frank Act does not require that the whistleblower directly provide the information to the SEC in order to pursue a claim. Rather, all that is required is that the whistleblower allege that he acted jointly in an effort to provide the information concerning the alleged misconduct to the SEC.

Patrick Egan was a salesman at TradingScreen, Inc., a privately held investment services firm, when he discovered that its chief executive officer was diverting company assets to other entities. Mr. Egan reported the wrongdoing to the company president, who in turn notified the board of directors, and an internal investigation led by a law firm confirmed his allegations. However, the CEO managed to gain control of the board of directors, avoiding termination, and fired Mr. Egan. Mr. Egan sued, seeking relief on various grounds including under the Dodd-Frank Act's provisions permitting a whistleblower who reports securities violations to assert a private right of action if he is retaliated against for providing the information.

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