Supreme Court: Whistleblowers Must Report To SEC For
Dodd-Frank Whistleblower Protections

Earlier today, the U.S. Supreme Court issued its Opinion in
Digital Realty Trust v. Somers, a case that has been
closely watched by
SEC whistleblowers and
SEC whistleblower attorneys.  In today’s Opinion, the Supreme Court ruled that employees
must report to the SEC in order to be able to claim private
Dodd-Frank whistleblower protections.

Background Of The Case

On June 26, 2017, the Supreme Court agreed to hear the case.
 For background on the case, you can read my earlier post
about it by clicking
here.

The Supreme Court heard oral arguments in the case on November
28, 2017.  That same day, I gave an interview to Bloomberg
Radio about the oral arguments.  During the program, I
provided an SEC whistleblower lawyer’s perspective; the other
guest was one of the lawyers for Digital Realty.  You can
listen to the Bloomberg interview by clicking
here.

Individuals Already Must Report To The SEC To Be Eligible For
An SEC Whistleblower Award

It is already well-established that in order to be eligible to
receive an
SEC whistleblower award,
individuals have to report their information to the SEC.

The SEC created rules for how people must report their
information under the SEC whistleblower program.  It has also
been well-established that in order to be considered as a
“whistleblower” for purposes of receiving an
SEC whistleblower reward, an individual is required to follow the SEC’s rules and
procedures for submitting their information to the SEC.  (See, e.g., Opinion, p. 19.)

Dodd-Frank Whistleblower Protections

The Dodd-Frank Act gives certain protections to SEC
whistleblowers.  Among those protections are the rights not to
be retaliated against or terminated by an employer for
providing information about frauds and securities violations
to the SEC.  Under Dodd-Frank, employees who are retaliated
against or terminated for reporting such things to the SEC
have the right to bring their own private lawsuits in court
against their employers.

One big question that had divided U.S. District Courts and
U.S. Courts of Appeals was whether someone who only reports
internally to their employer, but does not also report to the
SEC, can claim Dodd-Frank whistleblower protections and bring
their own private lawsuit in court.  The U.S. Court of Appeals
for the Fifth Circuit had answered this question “no”.  The
Courts of Appeals for the Second and Ninth Circuits had said
“yes”.

Private Dodd-Frank Whistleblower Protections Are Only
Available To Individuals Who Report To The SEC

Today, the Supreme Court agreed with the Fifth Circuit.  As
stated in the Supreme Court’s Opinion:

To sue under Dodd-Frank’s anti-retaliation provision, a person
must first “provid[e] … information relating to a violation of
the securities laws to the [Securities and Exchange]
Commission”.  (Opinion, p.2.)

The Supreme Court’s Opinion

The Supreme Court based its ruling in part on the definition
of “whistleblower” found in the Dodd-Frank Act’s section on
the SEC whistleblower program.  That definition states that a
“whistleblower” is:

“any individual who provides … information relating to a
violation of the securities laws to the [Securities
and Exchange] Commission …” (Opinion, pp. 4, 9)
(italics in original.)

The Supreme Court said that this definition is “clear and
conclusive”.  (Opinion, p. 18.)

Another reason the Supreme Court gave is that the Dodd-Frank
Act’s SEC whistleblower program was created “to motivate
people who know of securities law violations to tell the SEC.”
 (Opinion, pp.4, 11.)

One way that Congress sought to motivate people to report to
the SEC was by providing for SEC whistleblower awards. Another
way that Congress sought to motivate people was by giving
extra SEC whistleblower protections to people who report to
the SEC.  (Opinion, p. 11.)

According to the Supreme Court:

Dodd-Frank’s award program and anti-retaliation provision thus
work synchronously to motivate individuals with knowledge of
illegal activity to “tell the SEC.”  (Opinion, p. 11.)

Elsewhere, the Supreme Court stated:

… it is understandable that the statute’s retaliation
protections, like its financial rewards, would be reserved for
employees who have done what Dodd-Frank seeks to achieve,
i.e., they have placed information about unlawful
activity before the Commission to aid its enforcement efforts.
 (Opinion, p. 16.)

What This Means For Potential SEC Whistleblowers And SEC
Whistleblower Lawyers

Because of today’s Supreme Court ruling, employees who report
securities frauds or violations to their employers, but have
not yet given their information to the SEC, cannot avail
themselves of Dodd-Frank whistleblower protections by bringing
their own lawsuits in court.  An employee who has not reported
to the SEC and who is retaliated against or fired by their
employer is not covered by those Dodd-Frank whistleblower
protections.

Only after someone reports their information to the SEC are
they eligible to receive an SEC whistleblower award.

Only after someone reports their information to the SEC are
they protected from retaliation and termination by the
Dodd-Frank Act.

It would therefore be prudent for anyone who has information
about a securities fraud or violation to report it immediately
to the SEC, as the former Director of the SEC’s Enforcement
Division urged.  (Click
here
for my post about the Director’s remarks.)

Keep in mind that whistleblowers are required to report their
information in the form and manner required by the SEC.  (See, e.g., Opinion, p. 19.)

It might therefore be prudent for potential whistleblowers to
consult with an experienced
SEC whistleblower lawyer
to make sure they adhere to all of the SEC’s rules and
procedures, and for help in presenting their information in a
way that will hopefully be well-received by the SEC Staff.

Additional Information

If you would like to read today’s Supreme Court Opinion about
Dodd-Frank whistleblower protections, you can find it at:
https://www.supremecourt.gov/opinions/17pdf/16-1276_b0nd.pdf

* * *

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The Pickholz Law Offices LLC is a law firm that focuses on
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the U.S. Securities and Exchange Commission, FINRA, and other
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The Pickholz Law Offices has represented employees, officers,
and others in SEC whistleblower cases involving financial
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How to Contact the Pickholz Law Offices LLC

If you would like to speak with a securities lawyer or SEC
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Pickholz at 347-746-1222.

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