If You Don't Go to the SEC, Are You a Whistleblower?

If You Don't Go to the SEC, Are You a Whistleblower?

Whistleblower or employee who just lost a job? The U.S. Court of Appeals for the Eight Circuit in St. Louis is attempting to clarify whether a claimant qualifies as a whistleblower—and thus protection from retaliation—under the Dodd-Frank Act when he or she does not complain directly to the U.S. Securities and Exchange Commission, according to Nick Beermann of Jackson Lewis in a recent blog post.

In the case, the plaintiff was an executive who sued her former employer and alleged it violated whistleblower protection rules when she was terminated. But the employer, COR Clearing LLC, objected to the claim and asked that it to be dismissed, arguing the plaintiff didn’t directly go to the SEC and thus wasn’t subject to its protection. A federal magistrate recommended dismissal, the plaintiff objected and the district court ruled in favor of the plaintiff, explains Beermann.

The district court found “the intent of Dodd-Frank was to provide broad whistleblower protection to informers who complain to an audience wider than just the SEC,” says Beermann. COR disagrees and wants the appeals court to halt the litigation.

Beermann explains that the Fifth Circuit has already ruled on this issue, but reached a different conclusion than the district court here. It ruled that the protection only extended to employees who “already had disclosed the alleged wrongdoing to the SEC and then were retaliated against on the basis of that disclosure,” he says. Should the Eight Circuit decide otherwise, there will be a split in the federal courts, which Beermann says could “set the stage” for a review at the U.S. Supreme Court.