Many employees who see wrongdoing in their companies try to navigate the crisis by sounding the alarm inside the company. They go to their supervisor, or maybe further up the ladder.
But if you do that for a securities law violation and then get fired in retaliation, the Supreme Court now says you cannot expect whistleblower protection under the securities laws. Instead, the Supreme Court ruled last week, you can only be considered a whistleblower if you have first gone to the SEC with your allegations.
In Digital Realty Trust, Inc. v. Somers (2018), the Supreme Court considered whether a man who tried to resolve securities law violations "in house" could be protected under the whistleblower protections of the Sarbanes-Oxley Act or the Dodd Frank Act.
But the whole point of the whistleblower provision in Dodd-Frank is to urge whistleblowers to come forward and alert the SEC, the Supreme Court ruled. In fact, someone cannot even properly be considered a whistleblower until they have blown the whistle to the SEC, the court ruled.
That might seem like a mess for an employee who sees wrongdoing but also doesn't want to make waves or jeopardize his or her career. But the Supreme Court also pointed out that the Dodd-Frank Act protects a whistleblower's anonymity all the way through.
In fact, whistleblowers are rewarded with a share of the proceeds of the violation. And whisteblowers have received hundreds of millions of dollars by blowing the whistle on securities violations, and their identities have never been revealed.
So the lesson is, if you see a potential securities violation, your best bet is to contact a lawyer about whether it is time to go the SEC.
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