February 21, 2018
Dodd-Frank Whistleblower Protection Narrowly Applicable
On Wednesday, February 21, the Supreme Court announced that whistleblower protections passed by Congress following the 2008 financial crisis only apply to those who report problems directly to the government. The Supreme Court ruled that the protections under the Dodd-Frank Act that keep whistleblowers from being fired, demoted or harassed only apply to those who report legal violations directly to the U.S Securities and Exchange Commission.
Individuals who chose to report problems directly to their company’s management rather than the SEC do not qualify for protection. Instead, such individuals are protected under the 2002 Sarbanes-Oxley Act (the “Act”), an older law used to protect against retaliation. However, the protections under the Act vary greatly from those afforded under the Dodd-Frank Act, including the length of time the person has to file a lawsuit and the amount of monetary compensation the reporting party is eligible to receive.
WHAT DOES THIS MEAN FOR ME?
The holding of this case could potentially encourage employees to report issues directly to the SEC, rather than to management. Advisers are prohibited from implementing policies that prevent employees from reporting violations to the SEC. Advisers are encouraged to conduct thorough testing to identify any potential issues or security law violations. If violations are identified, then advisers should take prompt action to address the violation as necessary.
Please contact Fairview if you have any questions or concerns regarding your compliance program and whistleblower protection.