On Wednesday, the U.S. Supreme Court unanimously ruled that employees are not protected by the Dodd-Frank Wall Street Reform and Consumer Protection Act from retaliation if they blow the whistle on alleged corporate misdeeds without going to the U.S. Securities and Exchange Commission.
This ruling brings to light a gap in the Dodd-Frank Act that hurts companies and whistleblowers. Most employees blow the whistle internally first – often because they simply are performing their job, or they want to provide their bosses with the opportunity to fix the problem. They must be protected in the process or employees will be discouraged from sounding the alarm.
Unfortunately, the decision makes clear that whistleblowers such as plaintiff Paul Somers who report violations of the securities laws within their companies are not protected from retaliation by Dodd-Frank if they do not also report the wrongdoing to the Securities and Exchange Commission.
Whistleblowers serve as our eyes and ears to Wall Street abuses, from the recent Wells Fargo scam to Enron. In the current deregulatory climate, they are consumers’ most effective watchdogs.
Despite Wednesday’s decision, it is doubtful that Congress intended to limit whistleblower protections under Dodd-Frank. Congress must act without delay to correct this loophole.