In an article in The National Law Journal, Phillips & Cohen whistleblower attorney Sean X. McKessy commented on The Supreme Court’s recent ruling in the case Digital Realty Trust v. Somers. The Court’s ruling narrows the Dodd-Frank Act’s protections for whistleblowers, stating that they only apply when a whistleblower reports financial misconduct directly to the Securities and Exchange Commission. As a result, the ruling discourages internal reporting by whistleblowers:
“I do think that the whistleblower office is going to have to change its messaging. You really need to report to the commission if you don’t want to lose one of these protections,” said Phillips & Cohen partner Sean McKessy, who stepped down in 2016 as the chief of the SEC’s whistleblower office. “While I was still the head of the whistleblower office, I forewarned that if this issue were resolved the way it ultimately was by the Supreme Court, that the office’s messaging would have to change to say you’d be crazy if you don’t report to the commission because you lose one of the basic tenets of the whistleblower program.”
Lawyers are also watching to see whether the Supreme Court’s decision backfires against the industry. “If internal compliance is ultimately destroyed, in the game of Jenga, this is the block that was pulled out to start the process of completely undermining internal reporting,” McKessy said.