A recent ruling by a New York federal court
marks a key victory for the SEC as it looks to encourage
whistleblowers to come forward and report Wall Street fraud and
receive internal protection.
U.S. District Judge Jesse M. Furman ruled that the
Dodd-Frank Act protects whistleblowers from retaliation even if
they report wrongdoing internally rather than to the SEC. The
decision keeps intact a suit by a former UBS mortgage-backed
securities strategist, Trevor Murray, who claims he was fired after
complaining that bank officials were pressuring him to skew his
research to support the firm's trading and loan origination
Whistleblower Reported Wrongdoing to His Superiors Internally,
Not the SEC
Murray was responsible for conducting research and compiling
reports on UBS' commercial mortgage-backed securities products that
were distributed to current and potential clients. Murray believed
that he was being pressured by his supervisors to produce
purportedly objective research reports about security products that
were false or misleading and intended to favor UBS's products and
trading positions, in violation of federal laws. In particular, he
was told to report better conditions in the CMBS market because it
was a significant revenue generator for UBS's securities arm,
according to the suit.
Murray told the bank's head CMBS trader that he was concerned
certain CMBS bonds were overvalued, but was told not to publish
anything negative about the bonds because they had been purchased
by the UBS trading desk, the suit alleged. Murray was later fired
despite having earned a "spotless review" of his work, according to
Dodd-Frank Act Prohibits Retaliation Even Where Whistleblower
The Securities Whistleblower Incentives and Protection provision
of the Dodd-Frank Act. section 78u-6(h)(1)(A), provides that:
[n]o employer may discharge, demote, suspend,
threaten, harass, directly or indirectly, or in any other manner
discriminate against, a whistleblower in the terms and conditions
of employment because of any lawful act done by the
(i) in providing information to the Commission
in accordance with this section;
(ii) in initiating, testifying in, or assisting
in any investigation or judicial or administrative action of the
Commission based upon or related to such information; or
(iii) in making disclosures that are required or
protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C.
78aet seq.), including section 10A(m) of such Act (15 U.S.C.
78f(m)), section 1513(e) of Title 18, and any other law, rule, or
regulation subject to the jurisdiction of the Commission.
15 U.S.C. § 78u-6(h)(1)(A); see id. §
78u-6(h)(1)(B)(i) (providing a private right of action for an
individual "who alleges discharge or other discrimination in
violation of subparagraph (A)").
In its motion to dismiss the suit, UBS argued that the
2010 Dodd-Frank Act defined a "whistleblower" as an individual
who provided information about a potential securities law violation
to the SEC. Murray did not fit that description, the bank said.
Sarbanes-Oxley Bans Retaliation Against Whistleblowers
But Judge Furman held that a separate Dodd-Frank
on the 2002 Sarbanes-Oxley Act, banned retaliation against
employees who blow the whistle about potential wrongdoing to
superiors even if they do not also report to the SEC. The
Court ruled that subsection (iii) protects a person who makes
"disclosures that are required or protected under the
Sarbanes-Oxley Act" even if that person does not make those
disclosures to the SEC. An interpretation and final rule
issued by the SEC supported the theory that a retaliation claim
could be made by whistleblower even if they only reported the
problems internally. The Court held that SEC ruling was
entitled to deference, stating, "In short, because the SEC's rule
clarifies an ambiguous statutory scheme the SEC was charged with
enforcing and reflects the considerable experience and expertise
that the agency has acquired over time with respect to
interpretation and enforcement of the securities laws, this court
defers to the SEC's interpretation."
In addition, the Court noted that four other recent cases have
taken the same broad view of the Act's anti-retaliation
The decision should aid efforts by regulators to root out fraud in
potentially hostile work environments, and should encourage more
whistleblowers to come forward.
The case is Murray v. UBS Securities LLC et al., case
number 12-cv-05914, in the U.S. District Court for the
Southern District of New York.
Contact Us To
If you have discovered evidence of government fraud,
contact an experienced False Claims Act attorney before blowing the
whistle. You may be entitled to a substantial reward and the legal
protections afforded to whistleblowers under state and federal
laws. The attorneys of Berger & Montague are nationally
recognized experts in Whistleblower/Qui Tam actions with over a
decade of experience pursuing these complex fraud cases. For more
information or to schedule your confidential consultation, use the
form on this page or call us at 1-800-424-6690.
For further reading:
Whistleblower Program Review of Year One
Prepare for Whistleblower Payouts under Dodd-Frank Act
SEC Whistleblower Statute: Section 922 of the Dodd-Frank
Protection For Qui Tam Whistleblowers
View Disclaimer here.