Home » Dodd-Frank Act » To be Protected, Securities Whistleblowers (in the Fifth Circuit) Must Blow the Right Whistle

To be Protected, Securities Whistleblowers (in the Fifth Circuit) Must Blow the Right Whistle

On July 21, 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. Along with the statute’s provisions reforming the financial sector, Congress included a whistleblower-protection provision, 15 U.S.C. 78u-6(h), which strengthened legal protections for employees who report violations of securities law. That is, the law encourages and protects securities law whistleblowers.

But to whom must a whistleblower blow the whistle to be protected under the Dodd-Frank Act? Is it enough to lodge an internal report with the company or must the employee directly notify the SEC? A number of courts have addressed this issue without delivering an agreed consensus. The Fifth Circuit, however, has concluded that to be a “whistleblower” under the Dodd-Frank Act, the employee must report the alleged securities law violation to the SEC; an internal report alone is insufficient.

According to the Fifth Circuit, “the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC.” That determination stems from the statute’s definition of “whistleblower” as “any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission.” 15 U.S.C. 78u-6(a)(6).

While there remains disagreement among various federal courts as to this limitation on the Dodd-Frank Act’s whistleblower protection provision, for the time being employees in the Fifth Circuit are only protected if they blow the whistle on securities law violations to the SEC. An employee who makes an internal report of a potential securities law violation but who does not report it to the SEC is not a “whistleblower” under the Dodd-Frank Act.

Asadi v. G.E. Energy, LLC, Case No. 12-20522 (July 17, 2013)


1 Comment

  1. […] Several weeks ago, this blog discussed the Fifth Circuit’s determination in Asadi v. G.E. Energy, LLC that for an employee-whistleblower to be protected by the Dodd-Frank Act, she must “provide information relating to a violation of the securities laws to the SEC.” Internal complaints alone are not sufficient, at least in the Fifth Circuit, to invoke the statute’s whistleblower protection provision. Asadi […]

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