Anti-Retaliation Protection for Compliance Officers as Internal Whistleblowers Under the Dodd-Frank Act

The Dodd-Frank Act protects whistleblowers from retaliation by their employers. Yet it is not clear whether this protection is limited to employees who have reported suspected wrongdoing to the SEC directly (external whistleblowers). Some courts have come to this conclusion. Others have expanded the scope of protection to individuals who reported their suspicions internally to a “person with supervisory authority over the employee or such other person working for the employer who has authority to investigate, discover, or terminate misconduct” (internal whistleblowers). Excluding them from the anti-retaliatory protection would most likely have a deterrent effect on potential internal whistleblowers. Likewise external whistleblowing is being incentivized as the SEC promises significant monetary awards ("whistleblower bounty money") in exchange for reports that ultimately lead to successful enforcement actions. For one particular group of employees however the described deterrent effect creates an unacceptable dilemma: Compliance officers are not incentivized to report suspected wrong-doings externally. They are excluded from the possibility to obtain monetary awards for disclosing information to the SEC. Quite to the contrary it is an essential part of their job to report their findings and suspicions internally. So compliance officers who are denied anti-retaliation protection find themselves in a dilemma which can be described as follows: Reporting externally would violate their professional duties and thus endanger their career. Reporting internally on the other hand might trigger retaliation from their employer for which there would be no legal remedy. Retaliation against compliance officers might not be as far-fetched a scenario as it sounds. In Meng-Lin Liu v. Siemens A.G. a compliance officer filed a complaint for allegedly having been retaliated after raising his concerns about a deal in North Korea that he believed circumvented internal compliance procedures. According to Liu he had informed Siemens China President and CEO that "compliance was low and that if [Siemens] were to follow compliance guidelines, Siemens would lose 30% of our healthcare business.” Liu claims that on the very day he reported this he was instructed not to return to work for the three months remaining on his employment contract which then expired. The district court dismissed the case on another reason (extraterritoriality), but found the 5th Circuit Asadi interpretation “appealing in that it avoids rewriting the statute”. The case is currently in front of the 2nd Circuit where the SEC has filed an amicus brief in support of the plaintiff-appellant Meng-Lin Liu. Compliance officers are not the only ones who should be troubled by this situation. The shareholders of the companies that hire compliance officers in order to decrease the liability risks that companies bear with respect to violations of the law do not want them to fight shy from speaking up about suspicious circumstances. This paper therefore suggests that corporations should protect their compliance officers by offering them individual anti-retaliation agreements.