"Corporate America, expect a spike in SEC reporting" by Christopher F. Regan and Timothy J. Coley (Law360)
Law360Christopher F. Regan
Eight years ago, the big debate between corporate America and the U.S. Securities and Exchange Commission was whether whistleblowers should be required to report internally before being eligible for awards and protections under Dodd-Frank’s anti-retaliation provisions. Ultimately, the SEC decided that the statute unambiguously prevented such an internal reporting rule; however, in an effort to mollify corporate America, the SEC, on its own, devised a few rules that it believed public companies could leverage to incentivize internal reporting (including bumping up the percentages for internal whistleblower awards and saving whistleblowers’ place in line at the SEC if they followed internal reporting protocols).
In the ensuing years, many companies seamlessly integrated Dodd-Frank’s rules and tools with Sarbanes-Oxley’s infrastructure requirements to create ethical cultures that fostered safe working environments and welcomed employee concerns and reporting of questionable conduct. A few companies, however, lodged strategic one-off court challenges against a handful of internal whistleblowers, arguing that the SEC’s interpretation was wrong and that Dodd-Frank did not protect internal whistleblowers who were fired before reporting to the SEC. A circuit split arose on the issue, and the debate became so hotly contested that individuals had to consider whether to report first to the SEC given the uncertainty of how a court could rule on the issue.