Fifth Circuit Limits SEC Whistleblower Program

by Morgan Lewis

Antiretaliation provisions only protect employees that provide information on violations of the securities laws to the SEC.

On July 17, the U.S. Court of Appeals for the Fifth Circuit issued a decision in Asadi v. G.E. Energy (USA), LLC, holding that, to be a "whistleblower" under the Securities and Exchange Commission's (SEC's) whistleblower program, an employee must provide information relating to a violation of the securities laws to the SEC.[1] In so ruling, the Fifth Circuit refused to defer to the SEC's regulation providing that internal reports could afford whistleblower protection under the program and declined to follow several district court decisions that had similarly found internal reports to be protected.


The plaintiff, Khaled Asadi, worked in Amman, Jordan, as GE Energy's Iraq Country Executive. According to the lawsuit, in 2010, Iraqi officials informed Asadi of their concern that GE Energy had hired a woman closely associated with a senior Iraqi official "to curry favor with that official in negotiating a lucrative joint venture agreement."[2] Asadi reported the issue to both of his supervisors and to the GE Energy regional ombudsman based on his alleged concern that this hire would violate the Foreign Corrupt Practices Act. Soon after making these reports, Asadi received a "surprisingly negative" performance review. After being pressured to step down from his position within a year of his internal complaints, he was fired.

Asadi filed suit, alleging that GE Energy violated the SEC whistleblower protections of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). GE Energy moved to dismiss, arguing that (a) Asadi did not qualify as a whistleblower under Dodd-Frank and (b) that Dodd-Frank's whistleblower protections do not apply outside of the United States.

The U.S. District Court for the Southern District of Texas granted GE Energy's motion to dismiss on the grounds that Dodd-Frank's whistleblower protections do "'not extend to or protect Asadi's extraterritorial whistleblowing activity.'"[3] Asadi appealed, and the Fifth Circuit reviewed de novo.

Fifth Circuit Decision

The Fifth Circuit affirmed the district court's decision but on different grounds. The court found that Asadi was not a "whistleblower" under Dodd-Frank because he did not make a report to the SEC, holding that "the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC."[4]

Dodd-Frank defines a whistleblower as "any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the [SEC], in a manner established, by rule or regulation, by the [SEC]."[5] Dodd-Frank protects whistleblowers from retaliation in employment for, among other things, "making disclosures that are required or protected under" the Sarbanes-Oxley Act of 2002; the Securities and Exchange Act of 1934, including section 10A(m); section 1513(e) of title 18; and "any other law, rule, or regulation subject to the jurisdiction of the [SEC]."[6] Asadi asserted that he was a whistleblower under this protection and argued that this section, on its face, does not require disclosure of information to the SEC.

The court disagreed, finding that Dodd-Frank "expressly and unambiguously requires that an individual provide information to the SEC"[7] and "provide information relating to a securities law violation"[8] in order to be considered a whistleblower. The court found that meeting this definition of a "whistleblower" is a threshold requirement. If an employee does not meet this requirement, he or she is not covered by the antiretaliation provisions of the SEC whistleblower program. If an employee does provide information relating to a violation of the securities laws to the SEC, then he or she is protected from the categories of conduct set forth in the statute, including internal reporting as provided above. Because Asadi never reported to the SEC, the court found he was not a "whistleblower" under the terms of Dodd-Frank's SEC whistleblower program.

In this ruling, the Fifth Circuit refused to defer to the SEC's regulations on the Dodd-Frank whistleblower program. On May 25, 2011, the SEC promulgated final regulations that specifically state that an individual may be a whistleblower even though they never report to the SEC, so long as they make disclosures that are "required or protected under the Sarbanes-Oxley Act of 2002."[9] The Fifth Circuit found that the text of Dodd-Frank itself requires that a whistleblower report to the SEC, and the Court rejected the SEC's expansive interpretation of the term.

Practical Implications

This decision significantly narrows the definition of a "whistleblower" under Dodd-Frank's SEC whistleblower program from the expansive definition provided in the SEC's regulation and adopted by several district courts. As a result, fewer employees will have a private right of action for retaliation under this program. Employees making internal reports of wrongdoing, however, may still be protected under the Sarbanes-Oxley Act and other federal and state antiretaliation laws.

[1]. Asadi v. G.E. Energy (USA), LLC, No. 12-20522 (5th Cir. July 17, 2013).

[2]. Id. at 2.

[3]. Id. at 2-3.

[4]. Id. at 5.

[5]. 15 U.S.C. § 78u-6(a)(6).

[6]. 15 U.S.C. § 78u-6(h)(1)(A)(iii).

[7]. Asadi, No. 12-20522, slip op. at 6.

[8]. Asadi, No. 12-20522, slip op. at 8.

[9]. 17 C.F.R. § 240.21F-2(b)(1).

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.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.