Can a Whistleblower Give Company Documents to the SEC?

A question that a client may ask his or her
SEC whistleblower law firm is whether he or
she is allowed to turn over company documents to the SEC. 
This can create a dilemma for an
SEC whistleblower lawyer.

One reason for this dilemma is that the traditional corporate
law and employment law view has long been that corporate
documents belong to the company.  Therefore, an employee can
get into trouble for taking them without permission.

However, in the SEC whistleblower context, the Dodd-Frank Act
and the SEC Rules allow whistleblowers to turn over company
information to the SEC.  In practice, the SEC has interpreted
“information” to include documents.  These are neither new nor
unique concepts in the law enforcement context.

There are, however, important caveats that an SEC
whistleblower and his or her SEC whistleblower lawyer should
keep in mind.

The Dodd-Frank Act

Section 922(h) of the Dodd-Frank Act prohibits an employer
from retaliating against an SEC whistleblower for “providing
information to the [Securities and Exchange] Commission…”  (§
922(h)(1)(A)(i).)

The Dodd-Frank Act also prohibits retaliation for “initiating,
testifying in, or assisting in any investigation or judicial
or administrative action of the Commission based upon or
related to such information…”  (§ 922(h)(1)(A)(ii).)

SEC Rules

The SEC Rules set forth the SEC’s interpretation of Dodd-Frank
Act Section 922(h).  SEC Rule 21F-17(a) states that “No person
may take any action to impede an individual from communicating
directly with the Commission staff about a possible securities
law violation …”  The SEC has brought its own enforcement
actions against companies for retaliating against
whistleblowers who provided information to it.  (See my prior
post
here.)

“Retaliation” includes enforcing or threatening to enforce
confidentiality or other agreements that would impede or
prevent someone from providing information about securities
law violations to the SEC.  The SEC has brought actions
against companies that attempted to chill whistleblowers
through terms in confidentiality, severance, and separation
agreements.  (See my earlier post
here.)

U.S. Congressmen, Federal courts, and FINRA have all taken
similar positions to the SEC.  (See my post
here.)

In practice, the SEC interprets “information” as including
documents.  By way of example, the SEC’s TCR portal for the
on-line submission of tips has an automated function that can
be used by whistleblowers and their counsel to upload
documents directly to the SEC.

Criminal Law

Some SEC whistleblowers and SEC whistleblower lawyers may not
realize that even before the Dodd-Frank Act of 2010, it was a
federal crime to retaliate against “any person … for providing
to a law enforcement officer any truthful information relating
to the commission or possible commission of any Federal
offense”.  (18 U.S.C. § 1513(e).)   The punishment for
violating this law can be a fine, up to 10 years in jail, or
both.

The Defend Trade Secrets Act of 2016

Because the Defend Trade Secrets Act (DTSA) is so new, many
SEC whistleblowers and SEC whistleblower lawyers are not yet
aware of it.  From the DTSA’s name alone, some people may
assume that it is an Act designed to help companies protect
their information, not to protect whistleblowers who reveal
that information.

However, Section 7 of the DTSA is titled “Immunity From
Liability For Confidential Disclosure Of A Trade Secret To The
Government Or In A Court Filing”.

According to the DTSA, “An individual shall not be held
criminally or civilly liable under any Federal or State trade
secret law for the disclosure of a trade secret that is made
in confidence” to a government official “either directly or
indirectly, or to an attorney”.  (§§ 7((b)(1) –
7(b)(1)(A)(i).)

Important Caveats for an SEC Whistleblower or SEC
Whistleblower Lawyer

The statutes and rules discussed above, and the SEC’s practice
of accepting documents, seem to allow for a whistleblower to
provide information and documents to the SEC pursuant to the
SEC whistleblower program. 
However, those statutes and rules do not provide
carte blanche authority to employees.  They all have
certain caveats that are important to keep in mind:

• The Dodd-Frank Act only protects SEC whistleblowers
  from retaliation for any “lawful act” done by the
  whistleblower in providing information to the SEC. 
  (Dodd-Frank Act, § 922(h)(1)(A).)  This means that the
  whistleblower cannot commit a crime to obtain documents or
  evidence.  For example, the Dodd-Frank Act’s
  anti-retaliation protections will not be available to an
  employee who illegally hacks into the company’s computer
  servers, even if the employee then turns that information
  over to the SEC.
• SEC Rule 21F-17(a) says that no one can impede an
  individual from communicating “directly” with the SEC about
  a possible securities law violation.  This means that an
  employee may not be protected by this Rule for posting
  company information on a public website rather than giving
  it directly to the SEC.
• Under federal criminal law, 18 U.S.C. § 1513(e)
  requires that the information turned over to law enforcement
  officials must be “truthful”.
• The DTSA specifically states that the disclosure of a
  trade secret to the government must be “solely for
  the purpose of reporting or investigating a suspected
  violation of law”.  (DTSA § 7(b)(1)(A)(ii) (emphasis
  added.)  For example, if a person discloses a company’s
  trade secret information in the hope that a government
  investigation will gain that person some business advantage
  over the company, that person probably will not have
  immunity under the DTSA for the disclosure.
• Based on everything that I have discussed above, it seems
  likely that a
  Federal court
  would rule that it is permissible to provide documents to
  the SEC pursuant to the SEC whistleblower program.  But to
  my knowledge, this question has not yet been addressed in a
  court case involving the SEC whistleblower program.

* * *

About the Pickholz Law Offices LLC

The Pickholz Law Offices LLC is a law firm that focuses on
representing clients involved with investigations conducted by
the U.S. Securities and Exchange Commission, FINRA, and other
securities regulators.

The Pickholz Law Offices has represented employees, officers,
and others in SEC whistleblower cases involving financial
institutions and public companies listed in the Fortune Top
10, Top 20, Top 50, Top 100, Top 500, and the Forbes Global
2000. We were the first law firm ever to win an SEC
whistleblower award for a client on appeal to the full
Commission in Washington. Inside Counsel magazine named this
achievement one of the five key events of the SEC
whistleblower program. Examples of the
Firm’s SEC whistleblower cases are available here.

In addition to representing SEC whistleblowers, since 1995 the
Firm’s founder, Jason R. Pickholz, has also represented many
clients in securities enforcement investigations conducted by
the SEC, FINRA, the U.S. Department of Justice and US
Attorney’s Offices, State authorities, and more. Examples of
some of the many
securities enforcement cases that Mr. Pickholz has been
involved with are available here.

You can see what actual clients have had to say about The
Pickholz Law Offices by going to the
Client Reviews page on our website or by clicking here.

How to Contact the Pickholz Law Offices LLC

If you would like to speak with a securities lawyer or SEC
whistleblower attorney, please feel free to call Jason R.
Pickholz at 347-746-1222.

The Pickholz Law Offices remains open and will be fully
operational through teleworking while we all grapple with this
terrible pandemic. We hope that all of our clients,
colleagues, friends, and their families remain safe and
healthy. Our thoughts and prayers go out to everyone who has
been affected by COVID-19.