A recent Supreme Court ruling could have significant consequences for would-be whistleblowers on Wall Street. In a unanimous decision, the justices ruled that employees are not safe from retaliation from their employers if they do not first report corporate wrongdoings to the Securities and Exchange Commission (SEC).
The ruling comes as something of a blow to an existing federal law that aimed to fight fraud on Wall Street. That law, enacted by Congress in 2010, offered protections to whistleblowers who reported corporate malfeasance—a response to the devastating financial crisis that took place just a few years earlier.
What will this mean going forward?
Previous interpretations of the law in question—dubbed as the “Dodd-Frank law”—including those by the SEC, had allowed that it covered internal whistle-blowing. The Supreme Court’s recent decision suggests a much more literal reading of the law, dictating that if employees do not first turn to the SEC, all bets are off.
How this ruling plays out, and the effects it has going forward, will be worth monitoring. Whistleblower laws are often meant to foster greater transparency and encourage those who see wrongdoing to report it. Will this ruling instill fear in employees, or even worse, lead them to turn a blind eye in the future? That’s difficult to predict, though as it’s the SEC’s role to monitor illicit corporate activities, they remain a logical party to report such things to.
Still, financial professionals who feel as though their employers have wrongfully punished them may have options. Individuals who find themselves in such a situation could benefit from consulting with an experienced legal professional who may be able to offer guidance going forward.