• Another Court Rules That Dodd-Frank Act Whistleblowers Need Not Disclose Information Directly to the SEC
  • July 8, 2014 | Authors: Bryan B. House; Pamela L. Johnston; Courtney Worcester
  • Law Firms: Foley & Lardner LLP - Washington Office ; Foley & Lardner LLP - Los Angeles Office ; Foley & Lardner LLP - Boston Office
  • In Bussing v. COR Clearing, LLC, No. 8:12-CV-238 (D. Neb. May 21, 2014), a federal judge ruled that the anti-retaliation provision of the Dodd-Frank Act protects whistleblowers who do not disclose information directly to the Securities and Exchange Commission (“SEC” or “Commission”). In so ruling, the Bussing court joined a growing majority of federal courts that have found that employees that report internally are protected from retaliation, thus rejecting the conclusion of the Fifth Circuit in Asadi v. G.E. Energy (U.S.A.), L.L.C., 720 F.3d 620 (5th Cir. 2013).

    The court noted that subsection (iii) of 15 U.S.C. § 78u-6(h)(1)(A) prohibits employers from retaliating against “a whistleblower” who “mak[es] disclosures that are required or protected under ... any ... law, rule, or regulation subject to the jurisdiction of the Commission.” 15 U.S.C. § 78u-6(h)(1)(A). Nevertheless, a separate subsection of the Dodd-Frank Act, 15 U.S.C. § 78u-6(a)(6), defines “whistleblower” as “any individual who provides ... information ... to the Commission.” 15 U.S.C. § 78u-6(a)(6) (emphasis added). Joining several other courts, the district court ruled that the statutory definition did not define “whistleblower” as used in subsection (iii). The court conceded that statutory definitions ordinarily control the meaning of statutory terms, but the court was influenced by its view that the purpose of subsection (iii) was to “protect a broad range of disclosures.” The court found this to be “an unusual case.” Because “applying the definition to the provision at issue would defeat that provision’s purpose,” the court ruled that the statutory definition did not define “whistleblower” as used in subsection (iii).

    In addition to this threshold legal issue, Bussing is also significant due to its facts. The plaintiff, an Executive Vice President, alleged that she was fired because she complied with a Financial Industry Regulatory Authority (“FINRA”) request, pursuant to FINRA Rule 8210, to produce documents during an investigation of her employer, an investment company. In the course of preparing responses to this request, the plaintiff alleged that she identified potential or existing violations of FINRA rules and federal securities laws. Despite her superiors’ attempts to discourage her from cooperating with FINRA, she complied with the FINRA request and participated in FINRA’s onsite examination.

    The defendants argued that complying with the FINRA request was not a “disclosure” protected by the Dodd-Frank Act. The court disagreed, noting that the plaintiff had prepared her employer’s response to the FINRA request, which was provided, “i.e., disclosed,” to FINRA. The court further rejected the defendants’ argument that the Dodd-Frank Act should not be interpreted so broadly as to apply to gathering information for FINRA. The court viewed the response, which identified several particular violations, to be a disclosure “in a classic whistleblowing context.” Finally, the court held that FINRA Rule 8210 is a “rule ... subject to the jurisdiction of the Commission.” Thus, the court allowed the Dodd-Frank Act claim to proceed.