SEC Guidance Backs Protection for Internal Whistleblowers

The Wall Street Journal
August 5, 2015

Jordan A. Thomas discusses further SEC guidance regarding whistleblowers

When Dodd-Frank was passed, its whistleblower provisions stated employees who reported wrongdoing to the SEC would be protected against retaliation by their employers. The SEC has maintained that this protection extends to whistleblowers who first report problems internally and the guidance issued Tuesday reinforces that belief, said Jordan Thomas, Chair of Labaton Sucharow’s Whistleblower Representation Practice.

“I think the SEC is sending a clear message to the whistleblowers,  companies and courts about the scope of its authority to prosecute cases involving retaliation against whistleblowers,” said Jordan. “This provides whistleblowers with greater clarity as to where the commission is and its commitment to protecting them when they come forward and report wrongdoing.”

Jordan said the SEC’s guidance will “only strengthen, only increase the probability that other courts will view it the same way” as the agency. “The SEC is putting out guidance and it will be given weight in a court’s determination, but the courts are the final arbitrators,” he said.

Whatever the final ruling is by the courts, Jordan said it shouldn’t affect “responsible organizations,” as they want to know about potential wrongdoing and protect those who come forward to report it. Organizations that don’t make doing the right thing the only standard, “are likely to fear this because it’s likely to lead to more internal whistleblowers reporting to the SEC,” he said. “Those organizations are likely to fear that more employees are going to report externally.”

The SEC’s interpretation should give people more confidence to report internally, said Jordan, “because they will also know that if reporting internally doesn’t work, if the company doesn’t handle appropriately, they can go to the SEC.”