Newsletter
Winter
TABLE OF CONTENTS ARTICLES
EDITORS’ MESSAGE
By Harry R. Beaudry and Aaron G. Carlson
YOU’VE BEEN SERVED – WITH A SUBPOENA
By Mark A. Shoffner
TAKE NOTE, TEXAS, LETTERS OF INTENT MAY NEED A REWRITE
By Julie Gremillion, James L. Rice III, Tracy LeRoy and Angela Zambrano
MONITORING EMPLOYEES: HOW FAR CAN YOU GO?
By Michael V. Abcarian and Kevin A. Troutman
INSURANCE COVERAGE FOR EMERGING SOCIAL MEDIA RISKS
By Meghan H. Magruder, Anthony P. Tatum, Shelby S. Guilbert, Jr., Robert D. Stonebraker and Nicholas G. Hill
THE DODD-FRANK ACT WHISTLEBLOWER PROVISIONS AND THE SEC WHISTLEBLOWER PROGRAM IN 2014
By Richard C. Smith, Marsha Z. Gerber, Cristina K. Lunders and Kate Hunter
PRACTICAL TIPS FOR DRAFTING NONCOMPETES: LESSONS LEARNED FROM THE COURTHOUSE
By Joe Virene and Jonathan M. Hyman
TOP BUSINESS RISKS FOR CLOUD COMPUTING
By Erin Fonté and Jacqueline Allen
A DOZEN WAYS TO STRETCH YOUR BORROWING BASE
EDITORS’ MESSAGE
By Harry R. Beaudry and Aaron G. Carlson
We hope you enjoy this Winter Issue of the 2015 State Bar of Texas Corporate Counsel Section Newsletter. We are proud to present eight quality and informative articles.
• Mark A. Shoffner of Andews Kurth tells us what to do when your company is served with a subpoena.
• Julie Gremillion, James L. Rice III, Tracy LeRoy and Angela Zambrano with Sidley
Austin explain why the ETP-Enterprise decision might cause us to rethink the way we
look at “non-binding” letters of intent.
• Michael V. Abcarian and Kevin A. Troutman of Fisher & Phillips provide some helpful guidelines regarding employee monitoring.
• Meghan H. Magruder, Anthony P. Tatum, Shelby S. Guilbert, Jr., Robert D.
Stonebraker and Nicholas G. Hill of King & Spalding discuss insurance coverage
issues for social media risks.
• Richard C. Smith, Marsha Z. Gerber, Cristina K. Lunders and Kate Hunter of
Norton Rose Fulbright write about recent SEC whistleblower developments.
• Joe Virene and Jonathan M. Hyman with Gray Reed & McGraw provide some practical tips for drafting noncompete agreements.
• Erin Fonté and Jacqueline Allen of Cox Smith Matthews provide an overview of cloud computing services and summarize key business and legal risks.
• Bernard F. Clark with Haynes and Boone outlines 12 ways for oil and gas producers to stretch their borrowing base and/or help conserve their lines of credit.
If you have an idea for a newsletter article and would like to become an author, please feel free to contact us:
Harry Beaudry, Co-Editor ([email protected]) Aaron Carlson, Co-Editor ([email protected])
Jordan Benningfield, Assistant Editor ([email protected]) Cynthia Mabry, Assistant Editor ([email protected])
Looking ahead, please plan to attend the 37th Annual Corporate Counsel Institute. The
institute will be held in Houston (April 16 and 17) at the Royal Sonesta Hotel Houston and in Dallas (May 7 and 8) at the Dallas/Addison Marriott Quorum by the Galleria. You can go to
www.utcle.org for more details.
Please also make plans to attend the State Bar of Texas Annual Meeting. The meeting will be in San Antonio (June 18 and 19) at the Henry B. Gonzalez Convention Center. Our Section will co-sponsor a CLE event with the Business Law Section and hold a Section membership meeting on June 18. Please visit State Bar’s website at www.texasbar.com for more information.
THE DODD-FRANK ACT WHISTLEBLOWER PROVISIONS AND
THE SEC WHISTLEBLOWER PROGRAM IN 2014
By Richard C. Smith, Marsha Z. Gerber, Cristina K. Lunders and Kate Hunter1
The U.S. Securities and Exchange Commission (the “SEC”) continued to raise the profile of its whistleblower program in late 2014 with the first award given to an individual in a corporate compliance or audit position, as well as the issuance of the largest award to-date totaling over $30 million. With increasingly frequent announcements of whistleblower awards being given under a widening variety of circumstances, when making compliance program decisions, companies should consider the greater likelihood of whistleblower reports being made and the potential consequences of such reports.
The program that the SEC has put in place to implement Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012 incentivizes and protects those who raise concerns regarding compliance with securities laws whether they do so through participation in an internal compliance process or by escalating concerns directly to the SEC.2 Section 922
greatly expanded the incentives available to whistleblowers who report evidence of securities violations directly to the SEC.3 It provides that the SEC shall give an award to any
1) whistleblower who 2) voluntarily 3) provided original information to the SEC 4) which led to a successful enforcement action under the securities laws resulting in a monetary sanction greater than $1 million.4 It also prohibits retaliation for lawful actions taken in reporting violations to the SEC.5
Since the whistleblower program was announced, the SEC has received 334 whistleblower tips in fiscal year 2011, 3,001 in 2012, 3,238 in 2013, and 3,620 in 2014 from individuals who made the declaration required to be considered for an award.6 As of the end of the government’s 2014
fiscal year, the SEC has issued awards to 14 whistleblowers since the inception of the program.7
More than half of these were awarded in 2014.8
The cases that have given rise to whistleblower awards have frequently involved information regarding ongoing financial fraud, information that had been reported internally but never acted upon, or conduct that would have been difficult to detect without the report.9
According to the SEC, whistleblower reports helped “stop a multi-million dollar fraud,” “shut down a sham hedge fund,” “recover substantial investor funds” through an enforcement action, and “detect and halt an ongoing fraudulent scheme.”10 The SEC has stated that “[i]n each instance, the whistleblower
provided high-quality original information that allowed the Commission to more quickly unearth and investigate the securities law violation, thereby better protecting investors from further financial injury and helping to conserve limited agency resources.”11
As the number of whistleblower awards, the amounts involved, and the press coverage of such awards all increase, it is likely that more individuals will become aware of the whistleblower program, and potentially be incentivized to provide reports to the SEC. In order to ensure that companies’ compliance programs are designed to minimize the likelihood of external reports (by encouraging and effectively managing internal reports) and be in the best position to successfully respond to an external inquiry, companies must understand the whistleblower program, the incentives that it provides, and the restrictions that apply to those incentives.
I. Whistleblower
Any individual can be a whistleblower if they provide the SEC with information that relates to a possible violation of federal securities laws, regulations, or rules.12 Therefore anyone within or
outside a company who has access to such information, with very limited exception,13 has the
potential to become a compensated whistleblower. To date, over 40% of the 14 individuals who have received awards were current or former employees of the company they reported on and an additional 20% were contractors, consultants, or individuals recruited for such a role. 14
In order to manage the risk of external reporting triggering a costly, and potentially unwarranted external inquiry, companies should ensure their corporate compliance program invites reports to be made internally and that the culture of the company is conducive to such internal reports. After a report is received, it must be efficiently and competently processed and investigated, with appropriate remedial action taken, if warranted. In addition, companies should consider making progress reports to the individual who reported the information in order to assure them that the company is taking appropriate action. The SEC has reported that over 80% of the award recipients who were current or former employees had reported the conduct internally at the company first, and only reported to the SEC when the company failed to act accordingly. 15
Companies must also ensure that their encouragement of internal reports and appropriate handling of such reports occurs both in the United States and abroad. An employee, consultant, or agent need not live in the U.S. to report to the SEC. In fiscal year 2014, the SEC received whistleblower reports from individuals in 60 foreign countries.16 While there was initially some
debate about whether a foreign whistleblower could be eligible for an award, based in part on a Second Circuit decisions finding that the Dodd-Frank anti-retaliation provision did not apply outside the U.S.,17 in late 2014, the SEC announced that it would issue the largest whistleblower
award to date18—between $30 and 35 million—to a whistleblower living in a foreign country. 19
II. Original Information
While the whistleblower program incentivizes individuals with information about violations to report to the SEC, it has placed some restrictions on the ability of certain individuals to receive awards through the definition of “original information” and by placing restrictions on the eligibility of certain individuals to receive awards.
The SEC’s definition of “original information” prevents individuals who have a professional or legal role in a company’s compliance, investigative, or remedial efforts from being incentivized by a potential to go outside that process unless the company fails to take action in a specific timeframe. The SEC’s rules preclude certain groups from being eligible for an award, except under certain circumstances, because the information they obtain in their professional capacity will generally not be considered to be “original information.”20 These groups are: (1) compliance and audit employees; (2) people who obtain the information from legally privileged communications or in the context of a legal representation and disclosure is not otherwise permitted by the regulations; (3) officers, directors, trustees, or partners of an entity who are informed by another person of the information; (4) individuals with information acquired in connection with a compliance process; and (5) individuals employed by or associated with a company retained to investigate possible legal violations.21
However, any employees of a company retained to conduct an inquiry or investigation not covered by legal privilege and are not compliance or audit employees will become eligible for an award if: (1) disclosure of the information to the SEC is necessary to prevent the company from causing injury to its own or its investors’ financial interests, (2) the entity is impeding an investigation of the misconduct, or (3) 120 days have elapsed since the company’s audit committee, chief legal officer, chief compliance officer, or the individual’s supervisor received the information.22
On August 29, 2014, the SEC announced the first award—of $300,000—to a whistleblower who obtained information about potential wrongdoing while operating within the company in an audit and compliance role. There, the whistleblower had reported the conduct internally, and then waited for the company to take appropriate action. When the company failed to take action within 120 days, the whistleblower reported the conduct to the SEC. 23
Companies should note that while compliance and audit whistleblowers may report information to the SEC at any time, they will often not become incentivized by the potential for a monetary award until 120 days after the report is received by the company.24 If the company chooses to
independently report such information to the SEC before the 120 day period expires, the information is no longer “original information” and the whistleblower is no longer eligible for an award.
Companies should also note that outside counsel covered by legal privilege and the entities that they retain under that privilege remain ineligible for whistleblower awards, even after the 120 day period from the date of the internal report. Companies may want to evaluate their current protocol for engagement of outside counsel in response to internal reports to ensure that they are taking advantage of the opportunity to appropriately reduce the number of potential external whistleblowers.
In light of the incentives the whistleblower program provides individuals, including those individuals involved in the company’s compliance processes, companies should consider the actions that they can take to reduce the incentives for those individuals to report. This includes limiting the number of individuals who have access to “original information,” bringing an immediate halt to any activities that could be seen as ongoing and the cause of injury to the company’s and/or its investors’ financial interests, and avoiding any appearance that the company’s activities or omissions are impeding the investigation. Companies may also wish to consider making initial decisions about voluntary disclosure within the 120 day period. Finally, companies should consider providing appropriate reports to compliance and audit employees that have “original information” about the investigative, interim, and remedial steps that the company has taken, particularly if the company has reached the conclusion that no violation has occurred, or the company has chosen to voluntarily report (making the individual ineligible for an award). Even if that is not the case, a report may serve to discourage a potential whistleblower if the whistleblower believes the company is acting appropriately.
III. Leading to successful enforcement action resulting in a monetary sanction greater than $1 million
Despite the fact that the whistleblower program does not require 25 a whistleblower to internally report before reporting to the SEC, the SEC has claimed that it has sought to incentivize whistleblowers to report information internally before or at the same time they report to the SEC by allowing the whistleblower to receive credit for information reported to the employer if the whistleblower also reports the information to the SEC within 120 days of reporting to the employer and the employer itself reports the information or additional information based on an investigation prompted by the internal report.26
In order to be determined to have led to a successful action the information provided by the whistleblower or the employer must be (1) sufficiently specific, credible, and timely to cause the commencement of an investigation which then results in a successful action based on conduct that was the subject of the report or (2) about conduct that was already under investigation by any of the authorities listed in the rule and it contributed to the success of an action based on the conduct.27
Only judicial or administrative actions brought by the SEC can give rise to an award.28 For the
purposes of determining eligibility, the SEC will treat two or more actions it brings as one so long as they arise from the same nucleus of operative facts.29 This SEC action must in and of
itself have resulted in penalties, disgorgement, interest ordered to be paid, and money deposited into a disgorgement fund of at least $1 million.30
While the SEC’s actions allowing credit for internal reports under certain circumstances did not go as far as many companies hoped for by requiring internal reporting, companies should consider the impact of the existing rules when evaluating potential reports. This may include advising individuals who may have reported to the SEC, or who are in a position to make a report to the SEC, that they remain eligible for an award even if reported internally first, or if they share the information reported to the SEC with the company, and encouraging them to report internally.31
IV. Voluntarily
In order to be eligible for an award, the whistleblower’s report must be “voluntary”—i.e. not specifically requested by the SEC, Congress, or certain other enforcement authorities. This requirement may incentivize potential whistleblowers to report to the SEC, even before reporting internally, if they believe that their report may become requested. A report will be not be considered voluntary if it is given after the SEC, Congress, or certain other enforcement authorities direct an inquiry or request to the whistleblower or his agent (e.g., lawyer) related to the subject of the report. Such a request need not come with a subpoena or other compulsion power to preclude eligibility for an award. A report will also not be considered voluntary if the whistleblower is required to report the information under a preexisting legal duty to any of the above authorities.32
While a request to the potential whistleblower will make a subsequent report involuntary, this represents a narrower interpretation by the SEC than it initially proposed during rulemaking.
That proposed rule would have precluded a finding that a report was voluntary if the potential whistleblower or his employer had received a request from the SEC or another authority before the report was made.33
V. How an Award is Determined
The amount of the award depends on how helpful the whistleblower was to the SEC and the amount of the monetary sanction that resulted. An award must be between 10 and 30 percent of the collected monetary sanction in the SEC action or related actions.34 The amount of a sanction used to determine an award may include any amounts obtained in successful enforcement actions brought by certain other enforcement authorities;35
however, the action’s success must arise from the same information that lead to the successful SEC enforcement action. Moreover, the monetary sanction in the SEC action alone must meet the $1 million threshold for the whistleblower to be eligible.36
The first ever whistleblower to receive an award provided not only a tip, but also documentary evidence supporting their report.37 This whistleblower received 30% of the monetary sanction,
the maximum allowable under the statute.38 While not all whistleblowers awarded may have
themselves provided documents, the SEC has said that all provided some form of specific information, meaning they identified specific people involved in the violation, provided documents, identified the location of documents that would substantiate their claim, or identified particular fraudulent transactions.39
The statute and regulations identify several factors that are to be used in determining what percentage of the total sanction will compose the award. 40 The SEC may consider four factors in
determining whether to increase the amount of the award: (1) the significance of the information provided, (2) the assistance provided, (3) the programmatic interest of the SEC in deterring violations, (4) the extent to which the whistleblower participated in internal compliance systems.41 The regulations also provide three factors that the SEC may consider in decreasing
the amount of any award: (1) any culpability of the whistleblower in the underlying violations or his interference, if any, with the SEC’s investigation or enforcement action, (2) any unreasonable delay in reporting the violations, and (3) whether the whistleblower interfered with any internal compliance or reporting systems.42
Therefore, a whistleblower who reported to the SEC in a manner that was timely, reliable and complete would be considered for a larger award than one who provided incomplete information, was uncooperative, or unreasonably delayed in reporting. Even if the whistleblower award is reduced, it can still be substantial, and can encourage other potential whistleblowers to make reports. The largest whistleblower award to date, announced on September 22, 2014, of between $30 and 35 million, was the result of a downward reduction in the percentage used to calculate the award due to his unreasonable delay in reporting.43 While it is unclear what percentage the SEC arrived at in this case, the SEC stated that it took into consideration the fact that the claimant delayed in reporting the action for an unspecified length of time, allowing investors to continue to suffer significant monetary injury as a result of the delay. 44
VI. Conclusion
The Dodd-Frank Act whistleblower provisions provide powerful incentives and protections to whistleblowers, and they should be taken into account by any organization seeking to protect its best interests. Many whistleblowers may not internally report information, potentially putting the company in the disadvantageous position of first hearing of suspected wrongdoing via inquiry from the SEC. While a company cannot eliminate the possibility that such an event may occur, a company can reduce the likelihood by employing the practical steps outlined above. Even so, an effective internal reporting structure is no substitute for a proactive compliance program with policies, procedures, and trainings that educate employees as to how to conduct business ethically and in compliance with the law.
ENDNOTES
1
Copyright © 2015.
2 The SEC issued final rules implementing its whistleblower program on June 13, 2011. Securities
Whistleblower Incentives and Protections, 76 Fed. Reg. 34300, 34319 (June 13, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-06-13/pdf/2011-13382.pdf.
3
The Dodd-Frank Wall Street Reform and Consumer Protection Act § 922, 15 U.S.C. 78u-6 (2012).
4 Id.
5 Id. Protecting whistleblowers from retaliation is not limited to the Dodd Frank Act and is the subject of
numerous laws around the world. For information about other whistleblower protections in the United States and elsewhere, please see NORTON ROSE FULBRIGHT, A GLOBAL GUIDE TO WHISTLEBLOWING LAWS (2014),
available at http://www.nortonrosefulbright.com/us/knowledge/publications/120311/a-global-guide-to
whistleblowing-laws.
6 O
FFICE OF THE WHISTLEBLOWER, U.S. SEC. & EXCH. COMM’N, 2013 ANNUAL REPORT TO CONGRESS ON THE
DODD-FRANK WHISTLEBLOWER PROGRAM 8 (2013), available at http://www.sec.gov/about/offices/owb/annual report-2013.pdf [hereinafter 2013 ANNUAL REPORT]; OFFICE OF THE WHISTLEBLOWER, U.S. SEC. & EXCH. COMM’N, 2014 ANNUAL REPORT TO CONGRESS ON THE DODD-FRANK WHISTLEBLOWER PROGRAM 3 (2014), available at http://www.sec.gov/about/offices/owb/annual-report-2014.pdf [hereinafter 2014 ANNUAL REPORT]
7
2014 ANNUAL REPORT at 1; Order Determining Whistleblower Award Claim, Release No. 72301, File No
2014-5 (June 3, 2014), available at http://www.sec.gov/rules/other/2014/34-72301.pdf; Order Determining Whistleblower Award Claim, Release No. 72652, File No 2014-6 (July 22, 2014), available at
http://www.sec.gov/rules/other/2014/34-72652.pdf; Order Determining Whistleblower Award Claim, Release
No. 72727, File No 2014-8 (July 31, 2014), available at http://www.sec.gov/rules/other/2014/34-72727.pdf;
Order Determining Whistleblower Award Claim, Release No. 72947, File No 2014-9 (Aug. 29, 2014), available at http://www.sec.gov/rules/other/2014/34-72947.pdf; Order Determining Whistleblower Award Claim, Release
No. 73174, File No 2014-10 (Sept. 22, 2014), available at http://www.sec.gov/rules/other/2014/34-73174.pdf
[hereinafter “SEC Sept. 22 Order”].
8 Id.
9 See Id.; 2013 A
NNUAL REPORT at 14-15; Press Release, Sec. & Exch. Comm’n, SEC Announces Award for Whistleblower who Reported Fraud to SEC after Company Failed to Address Issue Internally (July 31, 2014), available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542578457; SEC Sept. 22 Press Release. 10 2013 A NNUAL REPORT at 15. 11 2013 A NNUAL REPORT at 14 . 12
17 C.F.R. § 240.21F-2(a) (2013). Entities are not eligible to receive whistleblower awards. Id.
13 15 U.S.C. 78u-6 (c)(2)(2012) sets out certain limited instances in which an award must be denied, including
when the information was obtained from an individual who is convicted of a criminal violation related to the
judicial or administrative action for which the whistleblower otherwise could receive an award and when the information was obtained from an individual who gained the information through the performance of an audit
of financial statements required under the securities laws and would otherwise be unauthorized to provide the whistleblower submission under the statutory requirements for financial audits.
14 2014 ANNUAL REPORT at 16. 15 2014 ANNUAL REPORT at 16. 16 2014 A NNUAL REPORT at 23.
17 The Dodd-Frank Act also prohibits any employer from retaliating against a whistleblower for any lawful act the
whistleblower undertakes in providing information the SEC, assisting with an investigation, judicial action, or administrative action, or in making any disclosures required by federal law. Prohibited retaliation could take the form of termination, demotion, suspension, threats, or harassment of a whistleblower by his employer. The statute provides a private cause of action and subpoena power for any whistleblower with a claim of retaliation. The relief contemplated by the provisions is reinstatement at a similar level of seniority, twice the amount of back pay owed plus interest, and compensation for litigation costs, expert witness fees, and attorney’s fees. 15 U.S.C. 78u-6(h). The Second Circuit has held that at least the anti-retaliation provision of Dodd Frank section 922 is inapplicable to foreign whistleblowers. In its recent decision, the Second Circuit held that the lower court had properly dismissed a retaliation claim by a foreign individual against his former employer for violating the whistleblower protection provision because it found no indication Congress intended the whistleblower protection provision to apply extraterritorially and the plaintiff had failed to demonstrate a sufficient nexus with the U.S. to constitute a domestic application. Liu v. Siemens, No. 13-4385-cv, 2014 WL 3953672 (2d Cir. Aug 14, 2014). In determining that the anti-retaliation provision did not apply extraterritorially, the Second Circuit rejected the plaintiff’s argument that the SEC’s implementing regulations applying the award provisions extraterritorially should be factored in to the extraterritorial reach of the anti-retaliation provisions. The court suggested that “no regulation could supply, on Congress’s behalf, the clear legislative intent required to overcome, the presumption against extraterritoriality.” (internal quotation marks omitted). Additionally, it stated that even if this was indicative of extraterritorial application, it would be limited to the award provisions and not apply to the anti-retaliation provisions. Id.
18 Current as of January 2, 2015. The largest award previously given was a $14 million award announced in
October 2013; SEC Sept. 22 Order at 3-4.
19
The SEC has taken the position that the Second Circuit’s decision that the anti-retaliation provision does not apply extraterritorially, see supra note 16, does not apply to the award provision. The SEC specifically stated that it does not find that case to be controlling because in the case of a whistleblower award there exists a sufficient U.S. nexus and the Congressional purpose underlying the award provisions is different than that underlying the anti-retaliation provisions. SEC Sept. 22 Order at note 2 (“[T]here is a sufficient U.S. territorial nexus whenever a claimant’s information leads to the successful enforcement of a covered action brought in the United States, concerning violations of the U.S. securities laws, by the [SEC]… the whistleblower award provisions have a different Congressional focus than the anti-retaliation provisions”). The SEC has thus far given awards to four whistleblowers living in foreign countries. Press Release, U.S. Sec. & Exch. Comm’n, SEC Announces Largest-Ever Whistleblower Award (Sept. 22, 2014), available at
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370543011290.
20 “Original information” means information derived from the whistleblower’s independent knowledge or
analysis, not already known to the SEC, and not exclusively derived from an allegation in another proceeding or the media. 15 U.S.C. 78u-6(a)(3); 17 C.F.R. § 240.21F-4 (2013).
21 17 C.F.R. § 240.21F-4. 22 17 C.F.R. § 240.21F-4. 23
Press Release, U.S. Sec. & Exch. Comm’n, SEC Announces $300,000 Whistleblower Award to Audit and Compliance Professional who Reported Company’s Wrongdoing (Aug. 29, 2014), available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542799812#.VAID3Eh2eos.
24 Unless the Company is causing injury to its own or its investors’ financial interests or impeding an investigation
of the misconduct. 17 C.F.R. § 240.21F-4(b)(v)(A).
25 This was a subject on which the SEC requested comment during the rulemaking process and proved to be a
topic of much debate. However, the SEC ultimately decided not to impose such a requirement because it would make the barriers to reporting to the SEC too high and it was not convinced that such a measure would result in better enforcement of the securities laws than the regime it adopted. Securities Whistleblower Incentives and Protections, 76 Fed. Reg. 34300, 34324-25 (June 13, 2011). The SEC noted in its final rule publication that “internal compliance programs are not substitutes for rigorous law enforcement.” 76 Fed. Reg. at 34324.
27 17 C.F. R § 240.21F-4(c). 28 17 C.F. R § 240.21F-4(d). 29 17 C.F. R § 240.21F-4(d). 30 17 C.F. R § 240.21F-4(e).
31 Note: As always, companies should take care to ensure that no retaliatory actions are taken against those
individuals who report internally or to the SEC. The SEC has also supported the application of the anti-retaliation provisions to individuals who report internally at a publicly traded company. While several courts have held that these provisions only apply if the report is made to the SEC, the SEC interpreted this provision more broadly in the rules implementing the whistleblower program and filed several amicus briefs in support of this interpretation. 2014 Annual Report at 19; 17 C.F.R. § 240.21F-2(b)(1).
32 17 C.F.R. § 240.21F-4. 33
76 Fed. Reg. at 34309.
34 15 U.S.C. 78u-6(b).
35 These include the “Attorney General of the United States,” “an appropriate regulatory authority,” “a
self-regulatory organization,” and “a State attorney general in connection with any criminal investigation.” 15 U.S.C. 78u-6(a)(5), (b)(1) and (h)(2)(D)(I-IV); 17 C.F.R. § 240.21F-3 (2014).
36 17 C.F.R. § 240.21F-3 (2014).
37 Press Release, U.S. Sec. & Exch. Comm’n, SEC Issues First Whistleblower Program Award (Aug. 21, 2012),
available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171483972; Press Release, U.S. Sec. & Exch. Comm’n, SEC Announces Additional $150,000 Payment to Recipient of First Whistleblower
Award (Apr. 4, 2014), available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370541413136.
38 Press Release, U.S. Sec. & Exch. Comm’n, SEC Issues First Whistleblower Program Award (Aug. 21, 2012),
available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171483972. 39 2014 A NNUAL REPORT at 16. 40 15 U.S.C. 78u-6(c); 17 C.F.R. § 240.21F-6 (2013) 41 17 C.F.R. § 240.21F-6. 42 17 C.F.R. § 240.21F-6.
43 SEC Sept. 22 Order.
44 EC Sept. 22 Order.
Richard C. Smith is a Partner with Norton Rose Fulbright in Washington, DC and is Head of
Regulatory and Governmental Investigations, United States.
Marsha Z. Gerber is a Partner with Norton Rose Fulbright in Houston, Texas.
Cristina K. Lunders is a Senior Associate with Norton Rose Fulbright in Houston, Texas. Kate Hunter is an Associate with Norton Rose Fulbright in Washington, DC.