United States: SEC Continues Its Efforts To Make Dodd-Frank Whistleblowing Easier

Last Updated: August 17 2015
Article by Edward T. Ellis, Kevin E. Griffith and Alexa J. Laborda Nelson

The Securities and Exchange Commission (SEC) recently issued interpretative guidance intended to advance the agency's position that a whistleblower is entitled to the anti-retaliation protections of the Dodd-Frank Wall Street Reform and Consumer Protection Act after making an internal complaint regarding possible securities law violations, even if the individual does not report directly to the SEC. The SEC's interpretation comes as no surprise, as it has taken this litigation stance since issuing its first Dodd-Frank regulation in 2011. The release of an official agency interpretation on August 4, 2015 may be the SEC's attempt to convince the courts to adopt its view. If the courts do, internal whistleblowers would have the benefit of Dodd-Frank's procedural process and remedies in addition to those under the Sarbanes-Oxley Act of 2002 (SOX).

The Basis for the SEC's Interpretation

The SEC admits the scope of the employment retaliation provision in Dodd-Frank is ambiguous. The Act unambiguously defines "whistleblower" as "any individual who provides... information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission."1 Such whistleblowers can be awarded a "bounty" of 10% to 30% of the monetary sanction the SEC obtains using the information in a successful enforcement action if the information is "original" (as interpreted by the SEC) and the sanction exceeds $1 million.

But, as the SEC also notes, the Act later includes a "prohibition against retaliation" that the SEC refers to as a "catchall provision." The SEC argues that this prohibition protects not only whistleblowers who provide information to the Commission, but also whistleblowers who make "disclosures that are protected under the Sarbanes-Oxley Act of 2002... and any other law, rule, or regulation subject to the jurisdiction of the Commission."2 The SEC's view is that, because SOX protects internal reporting, this "catchall" language was intended to extend Dodd-Frank's workplace retaliation protection to individuals who internally report violations of the Securities Exchange Act or the SEC's rules. Since the "catchall" anti-retaliation provision applies expressly to workplace retaliation, the SEC argues it should supplement the specific definition of "whistleblower," adding another layer of protection for employees who complain internally.

Finally, ignoring the existence of SOX, the SEC reasons that protecting employees who only report externally to the SEC, and not those who report internally, would have a chilling effect on the remedial purposes behind Dodd-Frank of uncovering, stopping and penalizing SEC violations and internal corporate fraud. Under the SEC's interpretation, employees are provided equal employment retaliation protection both for internal and external reporting.

The Counterargument

Some courts have taken the position that the SEC's interpretation is not supported by the plain text of Dodd-Frank. For instance, the SEC's interpretation is directly at odds with a decision issued by the U.S. Court of Appeals for the Fifth Circuit and other lower court decisions, which have examined the Act and held that Dodd-Frank's whistleblower protections do not apply unless the employee has provided information directly to the SEC. Not surprisingly, the SEC views these interpretations negatively and is working hard to advance its own interpretation, which has also been embraced by some courts.

In short, courts are split on whether Dodd-Frank requires employees to report externally to the SEC in order to garner anti-retaliation workplace protection. The SEC's new interpretive guidance affirms the SEC's expansive reading of the Act to include internal whistleblowers within Dodd-Frank's anti-retaliation protections.

The Implications of the SEC's Interpretation

Dodd-Frank protection would make some of the relief available that is not available to a prevailing whistleblower in a retaliation action brought under SOX. For instance, while Dodd-Frank's remedies are similar to those available under SOX, Dodd- Frank also allows for recovery of double the amount of back pay lost. The procedure for initiating a Dodd-Frank claim also differs from that under SOX as it does not require a whistleblower to initiate a claim with the Department of Labor, and provides a longer statute of limitations.

Will Courts Adopt the SEC's Interpretation?

Federal agency regulations, interpretations, and other pronouncements, such as litigation postures, are afforded different levels of deference by the courts. For example, an agency action that requires notice and comment, such as a rule, may have the force of law under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.3 Under the Chevron deference doctrine, the SEC's interpretation could alter how courts view Dodd-Frank's whistleblower protections. While the Securities Exchange Act and Dodd-Frank Act give the SEC rulemaking power, nothing in the Chevron deference doctrine gives the SEC the right to interpret the statute beyond its plain language. To earn Chevron deference from the courts, the SEC's interpretation must be based on a permissible reading of the Act's plain language. That means that the SEC's interpretation as formally published in the Federal Register is really just an enhancement of its litigation position.

An agency's interpretive rule is afforded a lower level of deference under Skidmore v. Swift & Co.,4 in which a court uses a number of factors to evaluate an agency's "power to persuade." The question then becomes: what level of deference, if any, should the courts give to the SEC's interpretative guidance? Chevron, Skidmore, or one of the other types of deference the U.S. Supreme Court has developed over the years?

Looking Forward

It appears that the SEC hopes its interpretation will influence court assessments of the scope of Dodd-Frank retaliation claims. The SEC has already petitioned the U.S. District Court for the Northern District of California for permission to file an amicus brief in response to an employer's Motion to Dismiss a former employee's Dodd-Frank retaliation claim. The brief the SEC seeks to file is the same as one it previously filed. This time, however, the SEC's motion highlights its recent interpretative guidance. In support of its motion, the SEC argues that, as the federal agency charged with administering Dodd-Frank, the SEC is best positioned to assist the trial court with its interpretation of Dodd-Frank and whether the Act protects internal whistleblowing. Amicus briefs at the trial level are extremely rare, so the Northern District of California must determine whether to accept the SEC's offer of assistance.

Should the split among the federal district courts and circuit courts of appeal regarding the scope of Dodd-Frank's anti-retaliation protections continue to expand, the issue could wind up before the U.S. Supreme Court. While this plays out in the courts, publicly traded companies covered by Dodd-Frank should be aware of the SEC's clear and unmistakable insistence on an enlarged definition of "whistleblower" and continue to be vigilant with their anti-retaliation policies and practices.


1 See 15 U.S.C. § 78u-6(a)(6).

2  See 15 U.S.C. § 78u-6(h)(1)(A)(iii).

3  467 U.S. 837 (1984).

4  323 U.S. 134 (1944).

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.

Edward T. Ellis
Kevin E. Griffith
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