Courts as gatekeepers: The perils of defending against whistleblower retaliation suits

Robert G. Houck and Benjamin A. Berringer

Journal of Financial Compliance, 2017, vol. 1, issue 3, 194-202

Abstract: One of the well-publicised aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank Act’ or ‘DFA’) is the US Securities and Exchange Commission (‘SEC’) whistleblower programme, which was created by Section 922 of the DFA and implemented through SEC regulations (the ‘DFA Whistleblower Provision’).1 Since its inception in 2012, the whistleblower programme has received more than 14,000 whistleblower reports from individuals in all 50 US states and 95 foreign countries.2 As a result of these reports, the SEC has instituted enforcement actions that have resulted in penalties of more than US$975 m3 and awarded approximately US$142 m to 38 different whistleblowers.4 While the whistleblower programme has undoubtedly helped uncover misconduct, one of the less examined aspects of the whistleblower programme is its potent anti-retaliation provisions, which are designed to protect whistleblowers. This paper will examine these anti-retaliation rules and how ambiguities in the DFA Whistleblower Provision and judicial precedent make it difficult for courts to serve a gatekeeper function to help sort meritorious and unmeritorious actions early in a dispute. This paper will first discuss the DFA Whistleblower Provision, focusing on potential ambiguities in the statute and regulation that established the whistleblower programme. It then discusses judicial treatment of the DFA Whistleblower Provision and why these cases suggest that courts will be unable to play a gatekeeper role. Finally, the paper addresses some practical considerations for minimising the risk of a frivolous whistleblower claim.

Keywords: whistleblower; Securities and Exchange Commission (SEC); DFA; Dodd- Frank; retaliation (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2017
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