United States: Second Circuit Decides Dodd-Frank Does Not Apply Extraterritorially, Skips Addressing Whistleblower Protection For Internal Reporting

Last Updated: October 2 2014
Article by Christopher D. McEachran

The Dodd-Frank Act prohibits employers from retaliating against employees who act as whistleblowers by providing information related to a violation of the securities laws to the Securities and Exchange Commission (SEC) in a manner established by the SEC. Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1). The jurisdiction and scope of this law have been tested recently in the U.S. Courts of Appeals for the Second and Eighth Circuits. In the Eighth Circuit, the court was asked to take up an interlocutory appeal to determine whether individuals who do not provide information directly to the SEC qualify as "whistleblowers" under Dodd-Frank. The Eighth Circuit declined to take up the appeal. The Second Circuit also was asked to weigh in on whether whistleblowers are protected if they report violations only internally, but the court did not need to reach that question. Instead, the Second Circuit held that Dodd-Frank does not apply extraterritorially, and because the plaintiff failed to allege that any of the events took place within the United States, Dodd-Frank did not apply. Liu v. Siemens AG, Docket No. 13-4385, (2d Cir. Aug. 14, 2014).

In Liu v. Siemens AG, the Second Circuit was presented with multiple issues, including whether the Dodd-Frank Act applied outside of the United States and whether Dodd-Frank's definition of whistleblower included an individual who reported violations only internally, within his or her company. The court did not need to reach the internal reporting issue, as it followed the Supreme Court's decision in Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247 (2010), in concluding that the Dodd-Frank Act was not intended to apply extraterritorially. Morrison stands for the proposition that a law will not be applied extraterritorially unless Congress affirmatively indicated that the law was meant to be so applied. Id. at 265. Relying on this precedent, the Second Circuit rejected Liu's arguments that the broad language of the Dodd-Frank Act could be read to imply extraterritorial application. The Second Circuit held that "there is no explicit statutory evidence that Congress meant for the antiretaliation to apply extraterritorially . . . . Thus 'we must presume [that the antiretaliation provision] is primarily concerned with domestic conditions.' " Liu, Docket No. 13-4385, at 20 (quoting Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29, 32 (2d Cir. 2010)

By affirming the lower court on the extraterritoriality question, the Second Circuit did not reach the issue of whether the Dodd-Frank Act protects would-be "whistleblowers" who do not report violations directly to the SEC. While Liu did not result in an opinion on that subject, the proceeding did provide insight into the SEC's point of view, as the SEC filed an amicus brief urging the court to defer to the SEC's interpretation of Dodd-Frank's whistleblower protection, discussed in additional detail on this blog . In its brief, the SEC argued that Dodd-Frank's anti-retaliation provisions apply to any individual engaging in protected whistleblowing activities, including reporting internally to the company as Liu did. The SEC reasoned that it had crafted its rules to provide "strong incentives" to report internally in the first instance, and pointed out that "if internal compliance and reporting procedures are not utilized or working, our system of securities regulation will be less effective."

The Eighth Circuit also had the opportunity to address the internal reporting question in Bussing v. COR Clearing, LLC. In Bussing, the district court denied COR Clearing's motion to dismiss a former executive's claim under the Dodd-Frank Act based on retaliatory termination after the executive reported potential violations to COR Clearing's top executives and to FINRA, but not to the SEC. COR Clearing argued that because the executive did not report directly to the SEC, Dodd-Frank did not apply. U.S. District Court Judge John Gerrard rejected this argument but allowed COR Clearing to pursue an interlocutory appeal to the Eighth Circuit. The court of appeals did not take COR Clearing up on its invitation and the case presumably will proceed at the district court level.1

With the Second Circuit sidestepping the issue and the Eighth Circuit refusing to take it up, the Fifth Circuit, in Asadi v. G.E. Energy (USA) LLC, 720 F.3d 620 (5th Cir. 2013), is the only appellate court to have spoken on the issue, holding that the Dodd-Frank Act's protection of whistleblowers does not apply to individuals who do not provide the SEC with information relating to securities law violations. While not binding outside the Fifth Circuit, the court's opinion in Asadi is at least persuasive, and at odds with the SEC's point of view as articulated in its amicus brief in Liu. Against this backdrop, an employee seeking to guarantee protection under Dodd-Frank should provide information of securities violations directly to the SEC. In addition, employers should assume that an employee reporting internally also will be making a report with the SEC, and the employer should act quickly to investigate the claims. Employers should take great care when dealing with potential whistleblowers to avoid any actions that may appear to be retaliatory in nature, particularly in light of the SEC's view.


1 Stephanie Russell-Kraft, 8th Circ. Denies Appeal on Dodd-Frank Whistleblower Limits, Law360.com, http://www.law360.com/articles/574043/8th-circ-denies-appeal-on-dodd-frank-whistleblower-limits, (Sept. 4, 2014 4:03 PM ET).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions