On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act ("Dodd-Frank") was enacted. In the employment
context, much has been written about the historic implications of
the new monetary awards outlined in Dodd-Frank Section 922 for
individuals who "blow the whistle" to the Securities and Exchange
Commission ("SEC") about violations of securities laws.
But, one should not overlook Section 922's strong anti-retaliation
provision. For attorneys representing employees, these
anti-retaliation provisions are, arguably, equally or more
significant than the bounty, because they provide robust
protections for a broad range of employees. Accordingly, this
article will outline Dodd-Frank Section 922's anti-retaliation
provisions and provide a brief analysis of Section 922's
protections compared to the anti-retaliation provisions in the
Sarbanes-Oxley Act of 2002 ("SOX").
The objective of Dodd-Frank Section 922
Section 922 amends the Securities and Exchange Act of 1934
("Exchange Act") to add a new section entitled "Securities
Whistleblower Incentives and Protections." As the name suggests,
the amendment does two things: first, it creates the potential for
whistleblowers to obtain financial awards for providing "original"
information to the SEC related to securities violations.
On Nov. 3, 2010, the SEC issued proposed regulations to implement
the whistleblower provisions. Under these proposed regulations, a
whistleblower is eligible for an award only if she "voluntarily"
provides "original information" to the SEC which "leads to the
successful enforcement" of an "action" where the SEC recovers $1
million dollars or more.1
A whistleblower is not eligible for an award if she fails to
submit the information to the SEC in the manner prescribed by the
SEC, or has a duty to report the misconduct because she is in a
compliance, legal or audit role.
Second, Section 922 provides anti-retaliation protections for
employee-whistleblowers against discharge, demotion, suspension,
threats, harassment and discrimination for enumerated protected
acts. Specifically, it protects against: (1) providing information
to the SEC in accordance with Section 922's new statutory awards
and protections; (2) initiating, testifying in or assisting in an
investigation or judicial or administrative action brought by the
SEC; and (3) making disclosures that are required or protected by
SOX, the Exchange Act and any other law, rule or regulation subject
to the SEC's jurisdiction.
To be entitled to either the financial bounty or the
anti-retaliation protections, Section 922 requires that the
employee qualify as a "whistleblower," i.e. an individual (or group
of individuals acting jointly) who provide information relating to
the potential violation of securities laws to the SEC in a manner
established by the SEC. This would include providing information
directly, or indirectly, pursuant to an SEC investigation or
inquiry, so long as the whistleblower is cooperating with the
Broad whistleblower anti-retaliation protections
Section 922 provides robust protections to
employee-whistleblowers who engage in protected activity. Under the
SEC's proposed regulations, employee-whistleblowers are protected
from retaliation if they report a potential violation of securities
laws. Therefore, unlike the bounty provision, the anti-retaliation
protections depend solely on the report of a violation, and
not the SEC's successful enforcement of the reported
The scope of Section 922's anti-retaliation protections is
similarly broad. Indeed, it applies to not just public companies,
but employee-whistleblowers in non-public companies who allege a
potential violation of any securities law regulated by the SEC. For
example, an employee would be protected if she blew the whistle
about potential violations of the Investment Advisors Act of 1940
by a registered investment adviser at a private
Procedural benefits and remedies for Section 922
whistleblowers as compared to SOX whistleblowers
For plaintiffs' attorneys, one important benefit of the
whistleblower protections under Section 922 is that it provides
direct access to the U.S. district courts. This is a significant
departure from other federal laws, like SOX, which require an
employee to file an administrative complaint with the U.S.
Department of Labor, Occupational Safety and Health Administration,
before bringing suit in federal court.
The statute of limitations for a Section 922 whistleblower
provides greater flexibility for whistleblowers as compared to SOX.
Most simply, a Section 922 claim must be brought within six years
from the date of the violation, but when "facts material to the
right of action are known or reasonably should have been known" by
the employee-whistleblower, it must be brought within three years
from such notice.
Given that the "knowledge" prong could greatly extend the relevant
statute of limitation, Section 922 provides an absolute cap that
all actions (whether or not known) must be brought within 10 years
of the violation. By contrast, SOX now requires that a plaintiff
file her administrative complaint no later than 180 days after the
date of the adverse act or after the date the
employee-whistleblower becomes aware of the violation. It is
apparent that Section 922's comparably long statute of limitations
is consistent with Congress and the SEC's intention to encourage
employees to come forward with such
Section 922, like SOX, also provides financial protections for
employee-whistleblowers, including reinstatement and attorneys'
costs and fees. Notably, Section 922 allows an award of two times
back pay, while SOX only allows for a single back pay award.
In other respects, however, the language of SOX's anti-retaliation
provision may be more plaintiff-friendly than Section 922. In
particular, SOX states that a prevailing employee-whistleblower is
entitled to "all relief necessary to make the employee whole." It
further allows for "compensation for any special damages sustained
as a result of the discrimination …"
In reliance on this language, some courts and administrative
review boards have allowed awards for emotional distress and damage
to the employee-whistleblower's reputation.2 Without
such language in Section 922, it is currently unknown whether a
Section 922 plaintiff will be able to recover such
With its enactment, Dodd-Frank Section 922 significantly expands
whistleblower protections to employees. While the long-term impact
of Section 922 is unknown, in the short term, there is no question
that it provides robust protections for employee-whistleblowers,
including those who may not be eligible for the financial
1Dodd-Frank provides that the SEC has 270 days from
the date of enactment - or until April 21, 2011 - to
issue its final regulations implementing Section 922. The SEC was
unable to meet this deadline and now, according to its website,
expects to issue the final regulations implementing Section 922
between May and July 2011.
2See e.g. Kalkunte v. DVI Financial Services, Inc. et
al, ARB Nos. 05-139 and 05-140, ALJ No. 2004-SOX-056 (ALJ February
27, 2009) (affirming award under SOX for "pain, suffering and
mental anguish"); Hanna v. WCI Communities, Inc., No. 04-80595-CIV
(S.D. Fla. Dec. 2, 2004) (damages to harm to reputation may be
awarded where it was necessary to make the employee "whole").