JACOB GERSHMAN / WALL STREET JOURNAL – A federal appeals court on Thursday ruled that corporate whistleblowers who report possible wrongdoing internally to their company before alerting securities regulators are protected by retaliation provisions of the 2010 Dodd-Frank financial reform law.

The 2-1 ruling by the Second U.S. Circuit Court of Appeals reversed a lower court and marked a victory for the U.S. Securities and Exchange Commission, which pushed to expand the scope of protections. The decision was a setback for companies that argued that employees shouldn’t qualify for whistleblower protection unless they first report their concerns to the government.

Judge Jon Newman, who wrote Thursday’s opinion, suggested that expanding the protections would chiefly benefit auditors and attorneys who are barred from reporting alleged wrongdoing to the SEC until they’ve brought it to their employer’s attention.

At least one other appellate court has ruled the other way, raising the prospects for U.S. Supreme Court review …

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