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The SEC Issues an Interpretive Release on Whistleblower Status for Purposes of Anti-Retaliation Protections

On Behalf of | Oct 1, 2015 | Securities Laws, Uncategorized

On August 4, 2015, the SEC issued an interpretive release to clarify that, for purposes of the employment retaliation protections provided under the Securities Exchange Act of 1934 (the “Exchange Act”), an individual’s status as a whistleblower does not depend on adherence to the reporting procedures specified therein.[1]

In our previous blog post on aiding and abetting securities violations (available here), we wrote that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) amended the Exchange Act to permit the SEC to bring an action for aiding and abetting a securities law violation.  The Dodd-Frank Act is a set of the most comprehensive financial regulatory reform measures taken in recent years, which also includes, among other things, numerous provisions designed to encourage and protect whistleblowers who report possible violations of the federal securities laws.  Specifically, the Dodd-Frank Act directs the SEC to pay an award to a whistleblower who voluntarily provides the SEC with original information that leads to the successful enforcement action in which the SEC obtains monetary sanctions of more than $1,000,000.[2]  Moreover, it protects whistleblowers by prohibiting employers from taking retaliatory measures against an employee/whistleblower and by allowing an employee alleging retaliation to bring an action directly in federal district court.[3]

To be sure, the applicable rule already provided, explicitly, that “[t]he anti-retaliation protections apply whether or not [the individual] satisf[ies] the requirements, procedures, and conditions to qualify for an award.[4]”  The SEC’s position, too, has always been that this language alone controls whether an individual qualifies as a whistleblower for the anti-retaliation protections, regardless of whether the individual followed the specific reporting procedures to qualify for an award.[5]  The confusion, however, seems to stem from the definition of a whistleblower within the rule itself, which requires that the individual provide the SEC with information pursuant to the procedures set forth therein.[6]  A recent decision in the Court of Appeals for the Fifth Circuit only seems to have added to the confusion by expressing some uncertainty about the agency’s permissive interpretation.[7]

To remove any lingering doubt, the interpretive release makes it clear that, for purposes of employment retaliation protections, an individual’s status as a whistleblower does not depend on adherence to the reporting procedures, even though the rule could be construed that way if read in isolation.[8]  The SEC explains that any contrary interpretation would be inconsistent with the plain language of the rule and undermine the agency’s overall goals in implementing the whistleblower program.[9]  Thus, under this reaffirmed interpretation, an individual who reports internally and suffers employment retaliation will be no less protected than an individual who comes immediately to the SEC.[10]  For employers, this means that an employer who is found to have violated the whistleblower provisions will be required to pay back wages, reinstate the employee, reimburse the employee for attorney and expert witness fees, if any, and take other steps to provide necessary relief.

If you have any questions about the content of this blog or other securities law issues not discussed here, please contact us.


This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C., which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or

[1] See generally 80 Fed. Reg. 47,829 (Aug. 10, 2015).

[2] 17 C.F.R. § 240.21F-3.

[3] 15 U.S.C. § 78u-6(h).

[4] 17 C.F.R. § 240.21F-2(b).

[5] 80 Fed. Reg. at 47830.

[6] 17 C.F.R. § 240.21F-2(a) (“(1) You are a whistleblower if, . . . , you provide the Commission with information pursuant to the procedures set forth in § 240.21F-9(a) . . . .; (2) To be eligible for an award, you must submit original information to the Commission in accordance with the procedures conditions . . . .”).

[7] 80 Fed. Reg. at 47830.  See also Asadi v. G.E. Energy (U.S.A.), L.L.C., 720 F.3d 620, 30 (5th Cir. 2013).

[8] 80 Fed. Reg. at 47830.

[9] Id.

[10] Id.