SEC Whistleblower Chief Discusses Recent Legal Developments

The Chief of the Office of the Whistleblower at the Securities and Exchange Commission (“SEC”), Sean McKessy, was interviewed by Law360 last week about the whistleblower office’s bounty awards, recent court rulings on the scope of Dodd-Frank’s anti-retaliation provision and other topics related to the developing law surrounding financial whistleblowers.  McKessy, whose tenure as the head of the SEC Whistleblower Office has been a frequent topic on this blog, said that he hopes the pace of awards issued to SEC whistleblowers will escalate in the coming months, noting that “the further we get from [July 2010], the more opportunity we’ll have for tips to ripen into successful actions.”

McKessy also addressed the recent decision by the Fifth Circuit in Asadi v. G.E. Energy (USA), LLC.  In that decision, which we wrote about in July, the Fifth Circuit ruled that the Dodd-Frank Act’s whistleblower protection provision does not apply to whistleblowers who report securities violations internally, and instead only protects those whistleblowers who provide such information to the SEC itself.  McKessy was ambivalent about the decision; while on the one hand, he described the idea that whistleblowers should not be afforded protections for internal reports as “bothersome” – particularly in light of the rules promulgated by the SEC, which stated that employees who report under their reporting structure “should be entitled to anti-retaliation protection – he also noted that the decision would likely drive more people to report their concerns to the SEC.

McKessy noted that while his office could certainly use more personnel, he felt comfortable with his staff in terms of his current workload, and thought his office was fully capable of handling the large amount of tips that come through each day.  Finally, he expressed his enthusiasm for new SEC Chairman Mary Jo White, who he described as a prosecutor with a “sterling record” who has given him “nothing but full support.”