Momentum for the SEC’s Dodd Frank whistleblower program is growing, and 2014 can be expected to bring continued expansion of the program and the number and types of whistleblower actions initiated by the SEC. The SEC’s annual report to Congress reported that 3,238 whistleblower tips were received in 2013, up almost 10% from 2012, and awards to whistleblowers who provide information to the SEC are increasing as more substantive tips are received.
An investigation by the SEC into a whistleblower tip can take several years to culminate in an enforcement action, so the last year likely saw just the beginning of a wave of enforcement actions. Despite the fact that over 6,000 tips have been received through 2013, the SEC has issued only six separate awards to tipsters. Those awards have ranged from $125,000 to a record $14 million, representing 10 to 30 percent of the overall funds recovered by the SEC in these whistleblower cases. READ MORE
Two victories for employers last week in Dodd-Frank and SOX whistleblower cases may provide a basis for at least a sliver of optimism among employers and whistleblower defense lawyers hammered by a recent series of employee-favorable decisions under the two main federal statutes covering whistleblowing activity.
Banko v. Apple
In Banko v. Apple Inc., Case No. 3:13-cv-02977-RS, a Northern District of California judge dismissed a Dodd-Frank retaliation claim where the employee only made a complaint internally to management and never complained to the Securities and Exchange Commission (SEC). The court followed the reasoning of the Fifth Circuit in Asadi v. G.E. Energy (USA), L.L.C. (see Orrick’s prior blog post on Asadi) and rejected a broader interpretation of the Act adopted by four district courts and the SEC that Dodd-Frank covers internal reporting protected by the Sarbanes-Oxley Act (SOX) as well as reports to the SEC. READ MORE
On July 17, 2013, the Fifth Circuit issued the first circuit court decision interpreting Dodd-Frank’s anti-retaliation provision. In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit held that, to be protected under Dodd-Frank’s anti-retaliation provision, an individual must be a “whistleblower,” which is defined by the statute as an individual who has made a report to the SEC. Notably, this holding directly conflicts with the SEC’s regulations interpreting the Act, as well as five district court decisions that had all held that employees who make internal reports to company management are protected under Dodd-Frank even if they did not make reports to the SEC.
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