January 19, 2021

Volume XI, Number 19


January 18, 2021

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Supreme Court Holds Whistleblower Must First Blow The Whistle To The SEC

In 2010, the United States Congress included both whistleblower incentives and protections in the Dodd-Frank Act.  If you are going to reward or protect "whistleblowers", it is helpful to know who they are.  Congress helpfully included the following definition:

“any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”

15 U.S.C. § 78u–6(a)(6).  Note that an element of the definition is reporting to the SEC.  The SEC's implementing rule, Rule 21F-2, however, includes no such requirement.  See Exactly What Part Of "To The Commission" Is Ambiguous? and California Judge Sides With Congress and Fifth Circuit In Whistleblower Split.

This morning, the U.S. Supreme Court answered the following question: Does the anti-retaliation provision of Dodd-Frank extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act’s definition of “whistleblower”? 

We answer that question “No”: To sue under Dodd-Frank’s anti-retaliation provision, a person must first “provid[e] . . . information relating to aviolation of the securities laws to the Commission.” §78u–6(a)(6).

Digital Realty Trust, Inc. v. SomersS. Ct. Case No. 16-1276 (Feb. 21, 2018).  Because the SEC's rule contradicts the statute, the Supreme Court accorded it no deference under Chevron
U. S. A. Inc. v. Natural Resources Defense Council, Inc.,
 467 U. S. 837 (1984).

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VIII, Number 52



About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...