Four years ago, when the Dodd-Frank Act was signed into law, a program was started to protect whistleblowers from retaliation if they report securities violations. Whistleblowers can also receive monetary awards for providing information to the Securities and Exchange Commission. However, a recent ruling by a federal appeals court draws into question whether tipsters from overseas are afforded the same protections afforded to whistleblowers in the U.S.
The ruling is quite significant, given that, according to the SEC, 12 percent of the individuals who participated in the program in fiscal 2013 were from outside the U.S., notably the United Kingdom, Canada and China.
In this most recent case, a former employee of Siemens China claimed that, after he reported alleged violations, his employer retaliated against him. For its part, Siemens claimed that "legitimate performance reasons," and not the employee's internal complaints, led to his parting with the company.
The appeals court, which upheld a ruling by a district court in New York, said that because the anti-retaliation provisions under Dodd-Frank don't specifically indicate that protections are afforded to tipsters abroad, the "provision does not apply extraterritorially." All of the parties involved -- the employer, the whistleblower and others -- are all based outside of the U.S., and all of the alleged wrongdoing, whistleblowing and retaliation occurred outside of the U.S., so the Dodd-Frank protections don't apply, according to the court.
Also in question is whether a whistleblower is protected from retaliation if he or she reports to the SEC after being fired. Internal reporting has been encouraged by companies, but companies have also claimed that internal whistleblowers who don't report directly to the SEC are not afforded protections against retaliation. The appeals court opted not to rule on these particular matters.
An amicus brief was filed by the SEC in support of the whistleblower in the Siemens case. The agency stated that individuals are protected from retaliation if they report internally or to the SEC. An attorney for the former Siemens employee said that, despite the appeals court ruling, certain foreign employees are still protected from retaliation under Dodd-Frank.
At Shepherd, Finkelman, Miller & Shah, LLP, we handle cases involving Dodd-Frank provisions. You can learn more about our legal practice here.
Source: The Wall Street Journal, "Appeals Court Says Whistleblower Protections Don't Apply Abroad," Rachel Louise Ensign, Aug. 14, 2014