Former SEC Prosecutor
and Wall Street Defense Counsel
The Federal Arbitration Act (FAA), 9 U.S.C. § 200 et seq., provides that two (or more) parties can agree to resolve any future differences through “mandatory arbitration,” i.e., a dispute resolution process held outside of the courts. But what if someone has signed a mandatory arbitration agreement as a condition of their employment, and they later discover wrongdoing that they want to report to law enforcement?
It depends on the laws that apply to your whistleblowing complaint.
For example, arbitration agreements do not prevent a whistleblower from filing a complaint with the Securities and Exchange Commission (SEC). On the contrary, federal law and related SEC rules specifically preclude a company from taking any steps (including enforcing a contract) to prevent an employee’s protected communication with law enforcement.
If you’ve made a whistleblowing report to the SEC under the Sarbanes-Oxley statute, then a pre-litigation arbitration agreement is null for claims relating to that report. In other words, you can still sue for retaliation in federal court; you can’t be forced into arbitration.
However, courts have held that if an employee alleges that an employer retaliated against them for whistleblowing claims made under the Dodd-Frank securities law, the arbitration agreement is enforceable. The employee can be required to go to arbitration to resolve the retaliation claim. There is a current proposal to revise Dodd-Frank to address this issue, but this hasn’t yet become law.
The discrepancy here just proves that, before whistleblowing, it’s important to contact an attorney and deal with all of the relevant facts in your case and to get assistance from experienced attorneys to navigate the process. Because even if it’s the same wrongdoing, how it is litigated can impact the whistleblower just as much as it impacts the wrongdoer.
Our attorneys also frequently represent the victims of Ponzi schemes, stockbroker misconduct, and brokerage firm fraud. In many circumstances, customer disputes must be submitted to securities arbitration before FINRA. We can represent investors seeking to operate on parallel tracks by filing a securities arbitration claim and an SEC whistleblower claim at the same time. A FINRA claim and an SEC whistleblower claim can serve different purposes and help an investor recover losses and stop fraud in its tracks.
If you’re considering becoming a whistleblower, concerned about the impact of arbitration on your ability to file a complaint, seek the advice of experienced securities attorneys. The Silver Law Group and the Law Firm of David R. Chase are here to help. For a free, confidential consultation, email us or call us today at 800.975.4345.