October 26, 2017

SEC Supreme Court Amicus Brief Filed in Support of Whistleblower Anti-Retaliation Provisions Under Dodd-Frank

By the C|C Whistleblower Lawyer Team

An article from Law360 discusses the SEC’s position on the anti-retaliation provisions in Dodd-Frank based on an amicus brief filed in the Supreme Court. The case involves whistleblower Paul Somers, a former employee of Digital Realty Trust Inc., who sought to take advantage of Dodd-Frank’s anti-retaliation provisions even though he did not report the alleged securities violations by Digital Realty to the SEC until after he was fired.

Somers claimed that he was terminated from his job based on false allegations of misconduct after he complained internally that a senior vice president at Digital Realty had eliminated internal corporate controls in violation of the Sarbanes-Oxley Act. Somers received a favorable ruling from the Ninth Circuit where a split panel ruled that Dodd-Frank’s whistleblower anti-retaliation provisions “unambiguously and expressly protect” internal and SEC whistleblowers. Digital Realty filed a writ of certiorari and the Supreme Court accepted the case in June.

In its brief, the SEC advocates for a flexible interpretation of Dodd-Frank’s anti-retaliation provisions to include internal whistleblowers. The SEC states that “Excluding such persons from Dodd-Frank’s protections would depart from usual understandings of the term ‘whistleblower’ and would undermine Congress’ effort to promote more rigorous and effective internal compliance programs.” The text of the relevant provision defines a “whistleblower” as one or more individuals who report information about a securities law violation to the Commission.

The SEC further argued that it would be against Congressional intent in expanding whistleblower protections through Dodd-Frank to conclude that it does not apply to internal whistleblowers. In 2011, the SEC promulgated a rule that the anti-retaliation provisions apply to internal whistleblowers and urged the Court to defer to the SEC’s “reasonable resolution” of the ambiguity within Dodd-Frank as to the scope of “whistleblowers.” The Supreme Court has set the oral argument for November 28, 2017.

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