Skip to content Skip to navigation

SEC Blog Header

SEC Whistleblower Blog

Current Articles | RSS Feed RSS Feed

Clarifying the Whistleblower Program's Anti-Retaliatory Provisions

Thursday, November 18, 2010

sarbanes oxley3

This fall, the SEC submitted for public comment its first draft of rules for the interpretation and enforcement of the whistleblower provisions of the Dodd-Frank Financial Reform Act.  The SEC took great pains to clarify the full scope of the protection now afforded employees when they report facts that may give rise to securities fraud or corporate bribery.

The primary statutory protections are anti-retaliatory provisions for employees who report to the SEC, and the specific creation of a private cause of action against the employer. The SEC whistleblower protection provision prohibits employers from discharging, demoting, suspending, threatening, harassing or otherwise discriminating against a whistleblower in the terms and conditions of employment. Any lawful act by the whistleblower either in reporting, or participating in the investigation or prosecution of violations of the securities laws, including disclosures that are protected under the Sarbanes-Oxley Act of 2002 (SOX). 

The relief specifically laid out in the statute includes reinstatement, double back pay with interest, compensation for litigation costs, expert witness fees and reasonable attorneys' fees.

SEC rules extend protection to “potential” violations of law.

A natural question for an employee after reading the above paragraph is, “am I still protected if I report to the SEC and the SEC decides not to proceed with an enforcement action based upon the information I submit?  The short answer is “yes." The SEC specifically addressed this issue and stated:

 “[use] of the term “potential violation” makes clear that the whistleblower anti-retaliation protections set forth in Section 21F(h)(1) of the Exchange Act do not depend on an ultimate adjudication, finding or conclusion that conduct identified by the whistleblower constituted a violation of the securities laws.  As noted in the Senate Report accompanying the legislation, “[t]he Whistleblower Program aims to motivate those with inside knowledge to come forward and assist the Government;”5 affording broad anti-retaliation protections to whistleblowers furthers this legislative purpose. “

Additionally, the SEC is developing a set of procedural requirements a whistleblower must go through to be deemed a “whistleblower” and then entitled to a whistleblower reward.

“We believe the statute extends the protections against employment retaliation in Section 21F(h)(1) to any individual who provides information to the Commission about potential violations of the securities laws regardless of whether the whistleblower fails to satisfy all of the requirements for award consideration set forth in the Commission’s rules.”

These rules apply only to the ability for a person to earn a cash reward but that a person is still entitled to the protections afforded them by the SEC Whistleblower Program regardless of whether the whistleblower followed the right procedures.