SEC Whistleblower Lawyers Comment on Proposed SEC Whistleblower Rules

Update: On September 23, 2020, the SEC adopted amendments to the rules governing its whistleblower program.  See our post: SEC Adopts Amendments to Whistleblower Rules that Will Strengthen Some Aspects of the Program But Also Reduce Large Awards and Limit Protection Against Retaliation

In conjunction with colleagues at the National Employment Lawyers Association, the Government Accountability Project and Public Citizen, SEC whistleblower law firm Zuckerman Law helped prepare comments on the proposed rules construing the anti-retaliation provisions of the Dodd-Frank Act. To read the comments, click here.

In late June 2018, the SEC proposed various amendments to the rules governing the SEC Whistleblower Program. For a summary of the proposed amendments to the SEC whistleblower rules, click here. Some of the proposed amendments address the scope of whistleblower protections for SEC whistleblowers.

The comments address six issues:

1. Narrowing the anti-retaliation provision of the Dodd-Frank Act would undermine the SEC Whistleblower Program and dissuade whistleblowers from reporting potentially unlawful activity. The comments “urge the SEC to abandon proposals that narrow Dodd-Frank whistleblower protections” and instead “recommend that the Commission adopt rules that effectuate the purpose of the statute and further the SEC’s mission.”
2. Dodd-Frank whistleblower protection should not be limited to written disclosures. Per the definition of “whistleblower” in the statute, any individual providing information relating to a potential violation of the securities laws to the SEC consistent with its rules should be protected, regardless of whether the information is provided in writing. Nothing in the statutory language requires or signals that a whistleblower may only be protected from retaliation if he or she provides information in writing. Imposing a writing requirement is inconsistent with the remedial purpose of the statute (provide robust protection to whistleblowers) and a significant departure from a well-developed body of precedent construing similar whistleblower protection laws.
3. Protecting disclosures of potential violations of federal securities laws is consistent with well-established precedent.
4. The SEC should not limit Dodd-Frank whistleblower protection to the subject matter of the whistleblower’s submission to the SEC. Nothing in the statutory language of Dodd-Frank limits an employee’s protection from retaliation protection to lawful acts that “relate to the subject matter” of the person’s SEC submission. Both the definition of whistleblower and the delineation of lawful acts articulate the substance of the whistleblowers protected disclosure to the Commission. Neither provision requires any connection between the retaliation experienced by the employee and her protected disclosure to the SEC. The proposed subject matter requirement would also inject uncertainty in that it is unclear how close the nexus must be between the disclosures to the SEC and any other protected conduct, such as a disclosure to the employer.
5. Whistleblower status should be accorded upon disclosing a potential violation to an internal ethics or compliance program. The comments propose that the SEC clarify that an employee’s internal disclosure of violations of securities laws to corporate audiences with relevant responsibilities, such as supervisory, ethics, audit or compliance personnel, qualify as an initial step for SEC disclosures under the Commission’s rules. The rule should then require the employer to forward those internal disclosures and its response to the SEC. By this mechanism, an employee’s internal disclosure meets Dodd-Frank’s statutory definition of whistleblower because the employee provided information relating to a violation of the securities laws to the SEC in a manner established by the SEC’s rules or regulations. This procedure would credit relevant internal disclosures as indirect communications to the SEC.
6. Consistent with well-established precedent construing analogous whistleblower protection laws, we propose that the SEC construe prohibited retaliation to include any employment action that is reasonably likely to deter employees from engaging in protected activity.

To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

SEC Whistleblower Law Firm

Whistleblower law firm Zuckerman Law represents whistleblowers in whistleblower rewards and whistleblower retaliation cases, including claims brought under the whistleblower rewards provisions of the Dodd-Frank Act. Under the SEC Whistleblower Program, the SEC will issue awards to whistleblowers who provide original information that leads to enforcement actions with total monetary sanctions (penalties, disgorgement, and interest) in excess of $1 million. A whistleblower may receive an award of between 10-30 percent of the monetary sanctions collected.