SEC Sides With Corporate Whistleblower on Key Issue of Protection

In an important case for whistleblower advocacy, last week, the SEC filed an amicus brief in California federal court contending that employees need not report misconduct directly to the government to qualify for whistleblower protection under Dodd-Frank. The underlying case involves a lawsuit filed by the former general counsel of Bio-Rad Technologies Inc. who claimed that he was terminated after voicing concerns about potential violations of the Foreign Corrupt Practices Act (FCPA). The company ultimately paid $55 million to settle the SEC’s charges.

While courts have generally sided with the SEC holding that a whistleblower need not report misconduct directly to a government agency to qualify for the anti-retaliation protections afforded by Dodd-Frank and Sarbanes-Oxley, in 2013, a federal appeals court ruled the other way. In all likelihood, the question of what triggers whistleblower protections will be an issue of ongoing debate in the courts that may go to the highest court in the land.
In many ways, this case and those like it are almost academic battles that will ultimately establish key legal precedent. So what’s a whistleblower to do? The key takeaway from the Bio-Rad matter is that individuals who wish to report misconduct would be wise to consider an early or simultaneous report to the SEC to assure eligibility for the protections guaranteed by statute to all whistleblowers.  Even a cursory filing of original information may be sufficient. In the long run, corporate compliance programs are a critical first line of defense against corporate wrongdoing. But for those defenses to work, whistleblowers must be encouraged and protected when they use them.