If you have been fired because you informed your supervisor or human resource department that your employer (or other employees) has violated securities laws, before filing a whistleblower complaint under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), there is one critical point that is required before the filing of the complaint: you must have reported the violation to the Securities and Exchange Commission (“SEC”).   The issue was recently clarified before the federal court located in the Southern District of New York in the case Daniel Berman v. Neo@Ogilvy LLC and WPP Group USA Inc., 1:14-cv-523-GHW-SN (S.D.N.Y. Dec. 5, 2014).

Relying upon a Fifth Circuit Court of Appeals case (while also disagreeing with a New York federal decision), the court made it clear the plain language in Dodd-Frank creates a private cause of action for those employees retaliated against by their employers only if the employee had informed the SEC of the alleged securities violation. This decision will inevitably create a delay in reporting by an employee to an employer, and that could very well preclude the employer from putting a stop to the improper actions of a fellow employee who is violating the securities laws.

The employee discovering the securities violation must take a moment and consider the ramifications of who is first informed of the violation. Without informing the SEC, the former employee will not have a viable Dodd-Frank whistleblower claim. Conversely, to employers in New York, your employees will not be immediately helping to resolve a problem without taking the time to first protect themselves.   This will delay any internal investigations, delay the stopping of improper behavior by employees who are violating securities laws and inevitably invite an examination by the SEC.

The Law Offices of Barry M. Bordetsky represents customers and industry representatives in FINRA securities and employment arbitrations as well as litigants before state and federal courts. If you have questions about an issue you are involved with, please contact Barry Bordetsky at (800) 998-7705 or email barry@bordetskylaw.com.