Should Dodd-Frank’s Internal Whistleblower Protections be Extended? (H.R. 2515)

What is H.R. 2515?

(Updated February 28, 2020)

This bill would expand protections for whistleblowers seeking legal recourse under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) by prohibiting employers from retaliating against employees who report possible violations of securities laws or Securities and Exchange Commission (SEC) regulations to their supervisors.

Currently, existing Dodd-Frank protections only give whistleblowers legal recourse if they’re retaliated against in connection with reporting potential violations to the SEC.

Argument in favor

The Supreme Court’s ruling in Digital Realty Trust, Inc. v. Somers last year made only whistleblowers who report to the SEC eligible for protections under Dodd-Frank. However, some whistleblowers may report internally; and they should also be protected under Dodd-Frank.

Argument opposed

The Supreme Court’s decision in Digital Realty Trust was decided on proper grounds and the SEC has already revised its rules regarding whistleblower protections to conform to the Court’s ruling. With this in mind, there’s no reason for this bill to overrule both the Court and the SEC.

Impact

Whistleblowers; SEC; and Digital Realty Trust.

Cost of H.R. 2515

The CBO estimates that there’d be no significant cost to implement this bill.

Additional Info

In-Depth: Rep. Al Green (D-TX) introduced this bill to extend protections for whistleblowers under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). 

The Securities Industry and Financial Markets Association (SIFMA) supports this bill. In a letter to Reps. Green and Bill Huizenga (R-MI), it writes: 

“Importantly, we support this legislation because it extends protection to whistleblowers who report internally at privately-held companies (specified in the legislation), such as non-public broker-dealers. Protection for internal whistleblowers has been a policy goal of the SEC since the outset of its whistleblower program, and we support efforts by Congress (and the SEC) to make clear that the anti-retaliation provisions extend to these whistleblowers as well as any other efforts to encourage internal reporting. SIFMA continues to believe that the first and best line of defense against violations of the securities laws is a robust internal compliance program responding to internal reporting of whistleblower claims. SIFMA has long been concerned that the whistleblower rules should encourage internal corporate compliance reporting systems, which are a critical component of what the SEC has recognized is the first and most important line of defense against securities law violations.”

SIFMA has long advocated that whistleblowers report to internal compliance systems first. In a 2010 comment letter to the SEC’s then-proposed whistleblower rules, SIFMA wrote, “We believe that individuals, at least in the financial services industry if not more broadly, should be required to report potential misconduct to effective internal compliance reporting systems and allow those systems a chance to work in order to be eligible for a whistleblower award.”

This bill has six bipartisan cosponsors, including five Democrats and one Republican. It’s also supported by SIFMA, the Government Accountability Project, Liberty Coalition, Project on Government Oversight (POGO), Public Citizen, Taxpayers Against Fraud and Zuckerman Law. 

Of Note: This bill was introduced in direct response to the Supreme Court’s decision in , where it held that Dodd-Frank’s anti-retaliation provision only applied to individuals who provide information regarding a violation of securities law to the SEC. In making this decision, the Court declined to defer to the SEC’s prior Rule 21F-2, which had permitted an individual to gain anti-retaliation protection without providing information to the SEC. 

Following the Court’s decision, the SEC voted to amend its own whistleblower rules to conform with the Court’s holding in . The National Law Review observes that if enacted, this bill “would significantly expand the scope of protections under the Dodd-Frank Act, and could lead to an increase in claims.”

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