The “Securities Whistleblower Incentives and Protection” section of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“DFA”) is an integrated scheme designed to encourage individuals to complain to the SEC of securities law violations by offering bounties and protection against retaliation. The two components of this section are: (i) a whistleblower bounty program; and (ii) a prohibition on retaliation against individuals who blow the whistle on violations of securities laws.
There’s much controversy over who is protected under the DFA anti-retaliation provision. On the one hand, the DFA unequivocally defines “whistleblower” as a person or persons who report a violation of securities laws to the SEC. 15 U.S.C. § 78u-6(a)(6) (emphasis added). But the following protective text in the same section, which prohibits retaliation for “any lawful act done by the whistleblower” has created confusion, as it encompasses: “disclosures … required or protected under [The Sarbanes Oxley Act] …, the Securities Exchange Act of 1934 …, including section 10A(m) of such Act …, section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.” 15 U.S.C. § 78u-6(h)(1)(A)(iii).
The SEC regulations for the implementation of the DFA whistleblower protection provisions (as well as the corresponding comments) distinguish the definition of “whistleblower” under the DFA anti-retaliation provision and the bounty program, noting that the definition under the former is broader, as it includes possible violations of Section 806 of the Sarbanes Oxley Act (“SOX”). See 17 CFR §240.21F-2 (2012); see also 17 CFR Part 200 cmt. at 17 (2012).
How Courts Have Addressed The Purported Contradiction
Three courts have squarely addressed this issue and concluded that individuals need not report original information to the SEC to be protected by the DFA’s anti-retaliation provision:
Employers Should Continue to Pursue This Defense
Notwithstanding those decisions, employers should continue to pursue dispositive motions where plaintiffs seek to invoke “whistleblower” status under the DFA’s anti-retaliation provision even though they failed to provide information to the SEC. In doing so, employers should consider focusing on the following arguments, which the foregoing cases either gave short shrift or did not consider: