The U.S. Supreme Court recently heard arguments in a case that could determine whether more employees can report securities violations within their companies without fear of reprisal or if more might instead go straight to the federal government with those allegations.
The Dodd-Frank Wall Street Reform and Consumer Protection Act has a whistleblower provision that protects employees from retaliation when they report a securities law violation. Courts have been grappling with the language of that provision, which defines a whistleblower as “any individual who provides . . . information relating to a violation of the securities laws to the [U.S. Securities and Exchange] Commission, in a manner established, by rule or regulation, by the Commission.”
Given that language, the question is whether employees can have Dodd-Frank’s anti-retaliation protection when they report a violation internally but not to the SEC. The SEC’s position is that Dodd-Frank protects from retaliation any employees who make internal complaints of alleged wrong-doing, even if they don’t report those complaints to the commission.
Depending on how the Supreme Court decides in Digital Realty Trust v. Somers, employees who raise violation concerns within their companies could be left without Dodd-Frank’s retaliation shield until they go to the SEC. That could incentivize whistleblowers to go straight to the federal government with alleged violations rather than risk unprotected termination from their employers.