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By Yin Wilczek
Sept. 5 — The U.S. Court of Appeals for the Eighth Circuit has declined to review a case involving whether would-be whistle-blowers must report perceived wrongdoing to the Securities and Exchange Commission to be protected under Dodd-Frank's anti-retaliation provisions.
The court's Sept. 4 order did not explain its rationale for denying a Nebraska-based securities clearing firm's request for permission to file an interlocutory appeal.
The question of whether informants are entitled to protection under the Dodd-Frank Wall Street Reform and Consumer Protection Act only if they first approach the SEC has divided several federal district courts.
In the case on appeal, the U.S. District Court for the District of Nebraska concluded that Julie Bussing, a former employee of Legent Clearing LLC, now known as COR Clearing LLC, qualified as a “whistle-blower” protected under Dodd-Frank, even though she provided information about a possible securities fraud to the Financial Industry Regulatory Authority, not the SEC.
The district court later agreed to certify its ruling for interlocutory appeal but denied the employer's request to stay the case pending resolution of the appeal.
Meanwhile, the U.S. Court of Appeals for the Fifth Circuit concluded in Asadi v. G.E. Energy (USA) LLC that Dodd-Frank's whistle-blower protections cover only those who initially approach the SEC.
With the Eighth Circuit refusing to take up COR Clearing's appeal, the Fifth Circuit remains the only appellate court to have tackled the issue.
The U.S. Court of Appeals for the Second Circuit had the opportunity to rule on the question in the case of Liu v. Siemens AG but punted.
The SEC, through an amicus brief in Liu, clarified its position that whistle-blowers are entitled to protection under its rules whether they report the wrongdoing to their employers or to the commission (29 CCW 68, 2/26/14).
In the Eighth Circuit, the U.S. Chamber of Commerce Sept. 4 urged the Eighth Circuit to hear the appeal, arguing that the district court's ruling significantly expanded the reach of Dodd-Frank's whistle-blower provisions.
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