A Tennessee court highlighted the split amongst circuit courts regarding the Dodd-Frank Act and its protections for whistleblowers.
On December 8, 2015, the Eastern District of Tennessee dismissed John S. Verble’s whistleblower claims, finding that Verble was not entitled to protection under the whistleblower provisions of the Dodd-Frank Act.
As described in Verble v. Morgan Stanley Smith Barney LLC et al., Verble was a financial advisor at Morgan Stanley who assisted the FBI in an investigation against the company as a confidential informant. The activities Verble was helping the FBI investigate included “fraud upon the government, fraud and wrongdoing in the securities industry, as well as fraud and wrongdoing in publically traded companies.”
In November 2012, a work colleague observed Verble meeting with FBI agents. In May 2013, Morgan Stanley had a contentious meeting with Verble, and placed him on “temporary leave”. In June of that year, Morgan Stanley terminated Verble’s employment.
Verble then filed his claim for whistleblower retaliation under 15 U.S.C. § 78u-6, a section of the Dodd-Frank Act that provides for “Protection of whistleblowers” and, more specifically, “Protection against retaliation.”
The Court held that, because Verble gave his information to the FBI and not to the Securities and Exchange (SEC) Committee, he was not entitled to the protection for whistleblowers under Dodd-Frank.
The ruling is discouraging, partly because of the narrowness of its scope and partly because it penalizes employees who do the right thing by reporting violations if they don’t report those violations to the “right” governmental agency.
What this ruling in Verble v. Morgan Stanley Smith Barney LLC et al. definitely points out is the necessity for whistleblowers to protect themselves by knowing their legal rights before they put themselves at risk.
Potential whistleblowers should not be dissuaded from speaking up when they know about fraud and wrongdoing. At the same time, they should definitely consult with an expert whistleblower attorney before they inadvertently lose their rights.