9th Circuit: Internal SEC Whistleblowers Can Sue Under Dodd-Frank Anti-Retaliation Provision

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A Win for Internal SEC Whistleblowers

On a 2-1 decision, the Ninth Circuit has affirmed the right of internal SEC whistleblowers to sue under the Dodd-Frank Act after they are retaliated against for informing their company of suspected violations of federal securities laws. The circuit split on anti-retaliation protections for internal SEC whistleblowers now consists of the Second and Ninth Circuits in favor and the Fifth Circuit against.

In the Ninth Circuit case, the employee reported several possible securities law violations to senior management and was terminated shortly thereafter. The Ninth Circuit opinion said that he was not able to report his concerns to the SEC before he was fired. After suing for retaliation, the defendant sought to dismiss, arguing that he did not meet the definition of “whistleblower” under the Dodd-Frank Act.

The opinion in Somers v. Digital Realty Trust Inc., Case No. 15-17352, 2017 WL 908245 (9th Cir. March 8, 2017) sides with the Second Circuit in Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2015) and disagrees with the Fifth Circuit in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013).

The majority opinion in Somers notes the ambiguity in the statute on the definition of whistleblower as well the limited scope of protections provided by a strict interpretation of the text which would contravene the Congressional intent. Moreover, it notes that the explicit reference to internal reporting provisions of the Sarbanes-Oxley Act meant that Congress could not have been applying the previous definition of whistleblower to this subsection. It then defers to the SEC regulation as a reasonable agency interpretation of the ambiguity pursuant to the Chevron doctrine.

Since Asadi, the SEC has waged war against companies arguing that internal SEC whistleblowers are not protected under Dodd-Frank. It has submitted amicus briefs in support of its position in several cases, including Berman and Somers. It looked close for a while there as a few courts sided with the defendants following Asadi. Now, it has hopefully been firmly resolved in favor of protecting internal SEC whistleblowers.


How to File an Internal SEC Whistleblower Complaint

Every case is different, however, there are some steps you can take to prepare your complaint:

  1. Gather Evidence: As you begin to the process of becoming an SEC whistleblower, the first thing you need to do is collect any relevant documents, emails, records, or other evidence that support your allegations of misconduct or violations. Don’t forget to include any information that demonstrates your knowledge and involvement in the matter.
  2. Learn about the SEC Whistleblower Program: Familiarize yourself with the SEC’s whistleblower program rules, regulations, and eligibility criteria. Review the official resources to gain a clear understanding of the whistleblower process and protections.
  3. Consult with an Experienced Whistleblower Attorney: Seek advice from an attorney who specializes in whistleblower cases, such as Young Law Group. They can provide legal guidance, assess the strength of your case, and help you navigate the filing process.
  4. Maintain Confidentiality: If you wish to remain anonymous, discuss strategies with your attorney to ensure confidentiality throughout the complaint process.
  5. Document Everything: Keep a detailed record of all relevant information, including dates, times, conversations, and any actions taken by you or others involved. This documentation will be crucial when filing your complaint and during any subsequent investigations.
  6. Organize Your Information: Arrange your evidence and documentation in a clear and logical manner. Create a comprehensive summary or timeline of events to present a coherent account of the misconduct or violations.
  7. Prepare a Complaint: Draft a clear, concise, and factual complaint that outlines the alleged violations or misconduct. Include specific details and reference the supporting evidence you have gathered. Avoid including personal opinions or speculation.
  8. Learn the Potential Risks: Assess any potential risks associated with filing a whistleblower complaint, such as retaliation or confidentiality breaches. Work with your attorney to understand the protections available under the SEC whistleblower program and develop strategies to mitigate risks.
  9. Submit the complaint: Follow the SEC’s guidelines for submitting an internal SEC whistleblower complaint. This may involve completing the online Form TCR or submitting your complaint via mail or fax, as instructed by the SEC.

How Much Do SEC Whistleblowers Get Paid?

SEC whistleblowers can be eligible for financial rewards if their information leads to successful enforcement actions resulting in monetary sanctions exceeding $1 million. The SEC whistleblower program offers a range of 10% to 30% of the total monetary sanctions collected as a reward to eligible whistleblowers.

The exact amount awarded depends on various factors, including the significance of the information provided, the assistance provided to the SEC, and the degree of cooperation during the investigation. The SEC maintains confidentiality about the specific amounts awarded to individual whistleblowers in effort to protect their identities.

Are SEC Whistleblower Complaints public?

SEC whistleblower complaints are generally confidential and not made public as the SEC takes the confidentiality of whistleblower information seriously and has established measures to protect their identities. The SEC’s whistleblower program allows individuals to submit tips, complaints, or referrals while maintaining their anonymity if desired. The SEC will not disclose information that could reveal the identity of a whistleblower unless required by law or in certain limited circumstances.

However, it’s important to note that if the SEC initiates an enforcement action based on the information provided by a whistleblower, the details of the case may become public during the course of the legal proceedings.

Choosing the Right SEC Whistleblower Lawyer

Young Law Group has aided whistleblowers help the government recover over $3 billion dollars. If you have evidence of a violation of SEC rules, call Young Law Group at 1-800-590-4116 or complete our online form for a free, confidential consultation with one of our SEC whistleblower attorneys.