Home » Dodd-Frank Act » With Dodd-Frank, Employers Must Tread Carefully When Employees Raise Securities Laws Concerns

With Dodd-Frank, Employers Must Tread Carefully When Employees Raise Securities Laws Concerns

Congress enacted Dodd-Frank in the wake of the 2008 financial crisis. As one component of its comprehensive reform of the financial regulatory system, the statute’s whistleblower protection provision encourages individuals to provide information relating to a violation of securities laws to the SEC. That whistleblower-protection provision, codified at 15 U.S.C. § 78u-6, encourages whistleblowing by: (1) requiring the SEC to pay significant monetary awards to individuals who provide information to the SEC that leads to a successful enforcement action, and (2) creating a private cause of action for whistleblowers to sue employers who retaliate against them for engaging in protected actions.

Employers, naturally, must treat whistleblowing employees with caution. Under the “Protection of whistleblowers” provision of Dodd-Frank,

No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower—

(i) in providing information to the Commission in accordance with this section;

(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or

(iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), including section 10A(m) of such Act (15 U.S.C. 78f(m)), section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

15 U.S.C. § 78u-6(h)(1)(A).

While the SEC continues to administer the law’s bounty program and the federal courts continue to interpret the scope of the law, employers and employees alike face difficult challenges in addressing and resolving situations in which an employee believes an employer’s policies, programs and/or activities run afoul of securities laws. As always, it is important to scrutinize the latest administrative and judicial determinations to help navigate the statute’s requirements.


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