Weiner Brodsky Kider PC

In an opinion that settled a circuit split, the Supreme Court has decided that the definition of “whistleblower” in the Securities Exchange Act of 1934 is limited to employees who provide information relating to violations of the securities laws to the SEC, and that only those deemed “whistleblowers” under the statute may invoke its protections.  This interpretation of the definition applies only to those whistleblowers subject to Sarbanes-Oxley; this ruling does not apply to the CFPB whistleblower provisions.

In the case before the court, the respondent employee was employed by a real estate investment trust. The employee alleged that his employer terminated his employment shortly after he reported suspected securities-law violations by employer to senior management.  After his termination, but before alerting the SEC of his employer’s violations and before filing any administrative complaints against his employer, the employee brought suit in U.S. District Court.

The Supreme Court found that because the employee did not provide information to the SEC before his termination, he did not qualify as a whistleblower at the time of the alleged retaliation, and therefore was ineligible to seek relief under Dodd-Frank.

Although the employee argued, among other things, that this interpretation of Dodd-Frank would narrow the significance of the protections offered for anti-retaliation, the Supreme Court stated that Congress’ aim was to encourage SEC disclosures, and requiring disclosure to the SEC before granting access to the court system is consistent with that goal.

 More information can be found here: https://www.supremecourt.gov/opinions/17pdf/16-1276_b0nd.pdf.

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