In recent months, the U.S. Securities and Exchange Commission (SEC) has proactively reassured investors that it is enforcing its rules that implement the “Securities Whistleblower Incentives and Protection” provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, set forth in Section 21F of the Securities Exchange Act of 1934. On Oct. 1, 2013, the SEC announced that it had issued an award of more than $14 million to a whistleblower whose information led to a successful enforcement action. The SEC’s 2013 Annual Report to Congress advised, inter alia, that the SEC’s Office of the Whistleblower (OWB) was actively coordinating with its Enforcement Division staff to “identify matters where employers may have taken retaliatory measures against individuals who reported potential securities law violations or have utilized confidentiality, severance, or other agreements in an effort to prohibit their employees from voicing concerns about potential wrongdoing.”
On Feb. 20, the SEC filed an amicus brief in a case pending in the U.S. Court of Appeals for the Second Circuit, Liu v. Siemens A.G., (No. 13-4385), to make clear that, under its rules, the term “whistleblower” includes individuals who report alleged wrongdoing through a company’s internal reporting system as well as individuals who report to the SEC itself. The SEC’s brief follows on the heels of the Fifth Circuit’s recent ruling in Asadi v. GE Energy (USA) LLC, 720 F.3d 620, 625 (5th Cir. 2013), which rejected the SEC’s broad definition of “whistleblower” and held instead that the “plain language and structure” of the Dodd-Frank Act establishes “only one category of whistleblowers: individuals who provide information relating to a securities law violation to the SEC.” If the Second Circuit defers to the SEC’s interpretation of “whistleblower,” then its decision will create a split among the circuits.
Statutory and Regulatory Context
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