August 3, 2020

Volume X, Number 216

August 03, 2020

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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 Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...