SEC LogoThe “Securities Whistleblower Incentives and Protection” section of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“DFA”) is an integrated scheme designed to encourage individuals to complain to the SEC of securities law violations by offering bounties and protection against retaliation.  The two components of this section are:  (i) a whistleblower bounty program; and (ii) a prohibition on retaliation against individuals who blow the whistle on violations of securities laws.

There’s much controversy over who is protected under the DFA anti-retaliation provision.  On the one hand, the DFA unequivocally defines “whistleblower” as a person or persons who report a violation of securities laws to the SEC.  15 U.S.C. § 78u-6(a)(6) (emphasis added).  But the following protective text in the same section, which prohibits retaliation for “any lawful act done by the whistleblower” has created confusion, as it encompasses: “disclosures … required or protected under [The Sarbanes Oxley Act] …, the Securities Exchange Act of 1934 …, including section 10A(m) of such Act …, section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.” 15 U.S.C. § 78u-6(h)(1)(A)(iii).

The SEC regulations for the implementation of the DFA whistleblower protection provisions (as well as the corresponding comments) distinguish the definition of “whistleblower” under the DFA anti-retaliation provision and the bounty program, noting that the definition under the former is broader, as it includes possible violations of Section 806 of the Sarbanes Oxley Act (“SOX”).  See 17 CFR §240.21F-2 (2012); see also 17 CFR Part 200 cmt. at 17 (2012).

How Courts Have Addressed The Purported Contradiction 

Three courts have squarely addressed this issue and concluded that individuals need not report original information to the SEC to be protected by the DFA’s anti-retaliation provision:

  • Egan v. Tradingscreen, Inc., No. 10-cv-8202, 2011 U.S. Dist. LEXIS 47713 (S.D.N.Y. May 4, 2011) (“Egan I“):  Finding that the seeming contradiction between the definition of “whistleblower” and the text of the anti-retaliation provision is “best harmonized” by construing the provisions not requiring reports to the SEC as a “narrow exception” to the definition.  Also finding that the plaintiff’s cooperation with the law firm was a sufficient basis for invoking DFA, provided that the firm contacted the SEC.
  • Noller v. Southern Baptist Convention, Inc., Nos. 12-cv-00040 & 00043, 2012 U.S. Dist. LEXIS 46484 (M.D. Tenn. April 3, 2012):  Finding that DFA anti-retaliation provision could apply to disclosures not made to the SEC, referencing 15 U.S.C. § 78u-6(h)(1)(A)(iii).
  • Kramer v. Trans-Lux Corp., No. 11-cv-1424 (D. Conn. Sept. 25, 2012) (rejecting argument that claim failed because plaintiff did not provide information to the SEC “in the manner required by the SEC,” concluding it would “dramatically narrow” protections to whistleblowers and was generally contrary to the goals of the DFA.

Employers Should Continue to Pursue This Defense

Notwithstanding those decisions, employers should continue to pursue dispositive motions where plaintiffs seek to invoke “whistleblower” status under the DFA’s anti-retaliation provision even though they failed to provide information to the SEC.  In doing so, employers should consider focusing on the following arguments, which the foregoing cases either gave short shrift or did not consider:

  • The Supreme Court requires courts to follow explicit statutory definitions, and the definition of “whistleblower” in 15 U.S.C. § 78u-6(a)(6) as a person or persons who report to the SEC could not be more explicit.  See, e.g., Burgess v. U.S., 553 U.S. 124, 130 (2008) (citing Stenberg v. Carhart, 530 U.S. 914, 942 (2000)).
  • Likewise, principles of statutory construction require statutes to be construed in a manner that prevents any words from being rendered superfluous (TRW, Inc. v. Andrews, 534 U.S. 19, 31 (2001)).  Therefore, courts should not read the phrase “to the Commission” in the definition of “whistleblower” out of the statute.
  • Courts should heed the greater context of the Securities Whistleblower Incentives and Protection section of the DFA in which the anti-retaliation provision appears.  See Davis v. Mich. Dep’t of Treasury, 489 U.S. 803, 809 (1989) (“It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme”).  It is no coincidence that Congress included these hand-in-glove provisions in the same section and at the same time it created the SEC Office of the Whistleblower – which is empowered both to enforce the anti-retaliation provision and to administer the bounty program.  The interconnectedness of these provisions becomes apparent when one considers Congress’ goal of giving whistleblowers a monetary incentive to report violations of securities laws to the SEC without fear of retaliation.  Moreover, Congress could have expanded the definition of whistleblower to include individuals who complain to agencies other than the SEC if that was its intention.
  • Accepting the reasoning of Egan I, Noller and Kramer nullifies Section 806 of SOX.  If an employee can engage in protected activity under the DFA anti-retaliation provision simply by making an internal report of one of the categories of fraud in Section 806 of SOX, then he or she could qualify as a DFA whistleblower simply by virtue of being a SOX whistleblower and pursue an action directly in federal court without exhausting administrative remedies.  If this were the case, individuals would bring SOX whistleblower claims under the DFA instead of SOX because the DFA offers twice as much backpay and a much longer statute of limitations.  It is unrealistic to assume that Congress intended such an extreme and anomalous result.  Indeed, rather than doing away with SOX’s requirement that complaints be initially filed with the Department of Labor, Congress instead amended SOX to increase the time for whistleblowers to file such complaints (from 90 days to 180 days after the employee became aware of the violation).
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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.