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Jul 29

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Fifth Circuit ruling re: Dodd-Frank Whistleblowers sets up Supreme Court appeal

In Asadi v. GE Energy (USA), L.L.C., No. 12-20522 (5th Cir. July. 17, 2013), the Fifth Circuit ruled that a whistleblower under Dodd Frank must report the complaint to the SEC to obtain whistleblower protection under Dodd-Frank. The Fifth Circuit summarized the statutory background and its ruling as follows:

“Congress enacted Dodd-Frank in the wake of the 2008 financial crisis. Section 922 of Dodd-Frank, as one component of the Act’s comprehensive reform of the U.S. financial regulatory system, encourages individuals to provide information relating to a violation of U.S. securities laws to the Securities and Exchange Commission (“SEC” or “Commission”). Section 922, codified at 15 U.S.C. § 78u-6, encourages such disclosures through two related provisions that: (1) require the SEC to pay significant monetary awards to individuals who provide information to the SEC which leads to a successful enforcement action; and (2) create a private cause of action for certain individuals against employers who retaliate against them for taking specified protected actions.3 We must answer a relatively straightforward question relating to the latter provision in this case: whether an individual who is not a “whistleblower” under the statutory definition of that term in § 78u-6(a)(6) may, in some circumstances, nevertheless seek relief under the whistleblower-protection provision. For the reasons that follow, we hold that the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC.”

This article summarizes the SEC’s whistleblower program.

The Fifth Circuit ruling conflicts with other circuits, thus raising the possibility of a U.S. Supreme Court review. If accepted as the final law, employees are provided even stronger inducement to skip their employer’s whistleblower system and report directly (or at least quickly) to the SEC. As described in this article, employers need to consider more rapid self reporting to the SEC. An outside reporting service is one of the means of encouraging employees to work with what their employers establish, and ensure that complaints are surfaced quickly.

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2013/07/fifth-circuit-ruling-re-dodd-frank-whistleblowers-sets-up-supreme-court-appeal/

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